Broadcomm Stock Recommendation
Company Overview
Market Capitalization
$21.95 billion
Revenues
$6.61 billion
Enterprise Value
$20.69 billion
20.47
Dividend Yield
0.90%
Current Ratio
Return on equity
22.26%
Return on Assets
9.15%
Operating Margin
14.47%
Profit Margin
16.36%
Stock Price & Ticker
$40.74 & BRCM
Broadcom is one of the worlds largest semi-conductor companies enabling wired and wireless communications. Its products include delivery of voice, data and multimedia through either a System-on-a-chip (SoC) or software solutions. The company has operations in North-America, Europe and Asia-Pacific. The following chart shows revenues generated from each of the business segments of Broadcom in the year 09. Also, some of the key financial statistics for the company are summarized below.
The companys diversified product portfolio serves as its strength strategic acquisitions as opportunity. It is highly dependent on US markets which is a weakness and faces threats from regulatory environment and litigations.
Industry Overview
The semi-conductor industrys outlook for growth is positive. Semi-conductor Industry Association (SIA) has expected the sales in the industry to grow at around 40.40% in 11 and around 17.08% in the next few years. The revenue share from different regions in ‘09 is presented below and Asia-Pacific is expected to dominate. Also, another report from iSuppli research indicates that wireless communications segment corresponded to second highest growth and would continue to do so with the launch of newer products with 3G/4G feature and increased demand.
Discounted Cash Flow
Assumptions:
Revenue Growth: Broadcom has a historical average revenue growth rate of 21.92% with the highest in 10 of 54.92%. The high growth rate in 10 can be attributed to the fact that the revenues from the companies they have acquired in the previous years were recognized and also due to the business from their two main customers – Apple and Samsung – who generated about 20% of their revenues. Also, Apple launched its product I-pad 1 and recorded sales of 15 million units in 10.
The future revenue growth rates for Broadcom have been arrived at after analyzing the historical trend, average, Broadcoms growth outlook from