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Broadcom Inc. (AVGO) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

Broadcom Inc. (AVGO) closed the most recent trading day at $315.53, moving +0.89% from the previous trading session. This move outpaced the S&P 500's daily gain of 0.16%. Elsewhere, the Dow 0%, while the tech-heavy Nasdaq added 0.26%.

Heading into today, shares of the chipmaker had gained 11.04% over the past month, outpacing the Computer and Technology sector's gain of 4.79% and the S&P 500's gain of 4.12% in that time.

Investors will be hoping for strength from AVGO as it approaches its next earnings release. In that report, analysts expect AVGO to post earnings of $5.37 per share. This would mark a year-over-year decline of 8.21%. Our most recent consensus estimate is calling for quarterly revenue of $5.76 billion, up 5.72% from the year-ago period.

Investors should also note any recent changes to analyst estimates for AVGO. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. AVGO is currently a Zacks Rank #3 (Hold).

Investors should also note AVGO's current valuation metrics, including its Forward P/E ratio of 13.42. Its industry sports an average Forward P/E of 21.69, so we one might conclude that AVGO is trading at a discount comparatively.

Also, we should mention that AVGO has a PEG ratio of 1.14. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Electronics - Semiconductors was holding an average PEG ratio of 2.49 at yesterday's closing price.

The Electronics - Semiconductors industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 40, which puts it in the top 16% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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