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Why Broadcom Inc. (NASDAQ:AVGO) Could Be Worth Watching

Simply Wall St
·3 min read

Broadcom Inc. (NASDAQ:AVGO) saw a decent share price growth in the teens level on the NASDAQGS over the last few months. 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? Let’s take a look at Broadcom’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Broadcom

What is Broadcom worth?

According to my valuation model, Broadcom seems to be fairly priced at around 16.39% above my intrinsic value, which means if you buy Broadcom today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $301.18, there’s only an insignificant downside when the price falls to its real value. What's more, Broadcom’s share price may be more stable over time (relative to the market), as indicated by 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. Broadcom’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? AVGO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on AVGO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Broadcom at this point in time. For instance, we've identified 3 warning signs for Broadcom (1 is a bit concerning) you should be familiar with.

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@simplywallst.com.