Here's what you should know: - Cheztalalrestaurant

Broadcom Inc. (AVGO) is one of the most closely watched stocks by Zacks.com visitors lately. Therefore, it might be a good idea to review some of the factors that could impact the stock’s short-term performance.

Shares of this chip maker have returned +36.4% over the past month, compared to the Zacks S&P 500 Composite’s change of +1.2%. The Zacks Electronics – Semiconductors industry, which includes Broadcom Inc., has gained 21.5% in the period. The crucial question now is: Where could the share develop in the short term?

While media releases or rumors about a material change in a company’s business prospects usually cause the stock to “trend” and result in an immediate price change, there are always some fundamental facts that ultimately influence the buy and hold decision.

Here at Zacks, we emphasize evaluating the change in a company’s future earnings outlook over anything else. This is because we believe that the present value of future earnings streams determines the fair value of the company’s shares.

Essentially, we look at how sell-side analysts covering the stock revise their earnings estimates to reflect the impact of the latest business trends. And when a company’s earnings estimates rise, so does the fair value of its stock. A higher fair value than the current market price increases investors’ interest in purchasing the stock and results in an increase in the stock price. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

Broadcom Inc. is expected to report earnings of $1.45 per share for the current quarter, representing a year-over-year change of +31.8%. Over the past 30 days, the Zacks Consensus Estimate has changed -0.2%.

For the current fiscal year, the consensus earnings estimate of $6.12 suggests a year-over-year change of +25.7%. Over the past 30 days, this estimate has remained unchanged.

For the next fiscal year, the consensus earnings estimate of $6.82 represents a change of +11.6% from what Broadcom Inc. was expected to report a year ago. Last month, the estimate remained unchanged.

With an impressive, outside-audited track record of success, our proprietary stock rating tool – the Zacks Rank – is a more meaningful indicator of a stock’s near-term price performance because it effectively harnesses the power of earnings estimate revisions. The magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, have led Broadcom Inc. to a Zacks Rank #3 (Hold).

The following chart shows the evolution of the company’s forecast 12-month EPS estimate:

While a company’s earnings growth is arguably the best indicator of its financial health, not much happens if it can’t grow revenue. It is almost impossible for a company to increase its profits without increasing its sales over long periods of time. Therefore, understanding a company’s potential revenue growth is crucial.

For Broadcom Inc., the current quarter consensus revenue estimate of $14.55 billion suggests a year-over-year change of +21.6%. For the current and next fiscal years, estimates suggest $61.12 billion and $66.07 billion, respectively, and a change of +18.5% and +8.1%, respectively.

Broadcom Inc. reported revenue of $14.05 billion in its most recent reported quarter, a change of +51.2% year-over-year. Earnings per share for the same period were $1.42, compared to $1.11 a year ago.

Compared to the Zacks Consensus Estimate of $14.06 billion, reported revenues represented a surprise of -0.06%. The EPS surprise was +2.16%.

The company beat consensus EPS estimates in each of the last four quarters. The company topped consensus revenue estimates three times during that period.

No investment decision can be efficient without taking into account the valuation of a stock. When predicting the future price performance of a stock, it is critical to determine whether the current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.

When comparing the current values of a company’s valuation multiples, such as price-to-earnings ratio (P/E ratio), price-to-sales ratio (P/S) and price-to-cash flow (P/CF), with its own values based on historical values can be determined , whether the stock is fair, overvalued or undervalued. Comparing the company with its competitors based on these parameters gives a good impression of the appropriateness of the share price.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and non-traditional valuation metrics) organizes stocks into five groups from A to F (A is better than B; B is better than C, etc.). ), which makes it helpful to determine whether a stock is overvalued, properly valued, or temporarily undervalued.

Broadcom Inc. receives a grade of F in this regard, indicating that the company is trading at a premium to its peers. Click here to see the values of some of the evaluation metrics that determined this grade.

The facts discussed here and much other information on Zacks.com could help determine whether the market hype surrounding Broadcom Inc. is worth paying attention to. However, the Zacks Rank #3 suggests that the company may perform in line with the broader market in the near term.

Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click here to get this free report

Broadcom Inc. (AVGO): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Related Posts

Traveling during the holidays during severe weather in the Brazos Valley

Top viral moments from FOX Weather’s live coverage this year

Nosferatu was called “one of the best films of the year” in early reviews

Leave a Reply Cancel reply