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Should You Think About Buying Broadcom Inc. (NASDAQ:AVGO) Now?

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Simply Wall St
·3 min read
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Let's talk about the popular Broadcom Inc. (NASDAQ:AVGO). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Broadcom’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Broadcom

What is Broadcom worth?

Broadcom appears to be overvalued by 30% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$479 on the market compared to my intrinsic value of $368.05. Not the best news for investors looking to buy! In addition to this, it seems like Broadcom’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Broadcom generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Broadcom. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in AVGO’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AVGO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on AVGO for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for AVGO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Broadcom (1 is significant!) and we strongly recommend you look at these before investing.

If you are no longer interested in Broadcom, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.