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브로드컴(AVGO)은 올해 S&P500을 크게 상회하며 주가 61% 상승, VMware 690억달러 인수 마무리 예정. 5년 평균 ROIC 12.5%로 기준(14%)에 미달, 잉여현금흐름은 2배 증가하고 순부채는 FCF로 충당 가능. FCF/기업가치 수익률 약 3~4.3%로 10년물 국채보다 낮아 매력도 낮음. DCF 적정주가 약 674달러로 현재가 대비 약 200달러 고평가로 제시. 정성적으로는 애플 RF 부품 강점과 네트워킹 칩 리더십이 긍정, 인수 의존과 저성장 소프트웨어 포트폴리오가 부정 요인. 종합적으로 추가 리서치 후보로 평가.
다듬은 글
is broadcom stock ticker avgo a buy now we're using the select 6 analysis to look at the most telling Financial metrics before estimating a fair value for broadcom then we're giving a final rating to the business there will be a key bonus metric along the way that just might be the Tipping Point when analyzing broadcom for your stock portfolio this analysis is around 10 minutes it's going to be intense but it's going to be worth it before we get into these valuable metrics let's understand broadcom stock performance this year broadcom is crushing the S P 500 they're trading for 892.28 cents per share year to date their stock price is up 61 percent broadcoms nearing the completion of their 69 billion dollar acquisition of VMware EU Regulators look like they're set to approve the deal broadcom just announced that they still expect the deal to close at the end of October just like planned but how's that big acquisition and broadcom's history of Acquisitions impacting the company far and above the 18 returns in the spy in the last five years broadcom's up almost 300 percent they're compounding at 32 percent annually in the last 10 years broadcom's up two thousand percent compounding at an insane 36 annually broadcom was one of the top performing stocks of the 2010s since being listed publicly 14 years ago broadcom is compounding at an insane 32 and a half percent annually right now they also pay an above average 2.01 dividend yield their average dividend throughout this time is added to the returns of their stock broadcom trades 30 below their 52-week High the company's up more than 450 dollars from their 52-week low just under two percent of their Shares are sold short broadcom is a huge business they have a 367 billion dollar market cap but the burning question is what's the secret to broadcom success and can they keep this up broadcom is the sixth largest semiconductor company globally and it's expanded into various software businesses with over 30 billion dollars in annual revenue it sells 17 core semiconductor product lines across Wireless networking Broadband storage and Industrial markets it's primarily a fabulous designer but holds some manufacturing in-house like for its best of breed fbar filters that go into the iPhone it counts apple as a large customer at roughly one-fifth of sales in software broadcom sells infrastructure and security software to large financial institutions and governments broadcom is the product of consolidation its businesses are an amalgamation of former companies like Legacy broadcom and avigo Technologies and chips as well as brocade CA Technologies and Symantec in software those last two were acquired for 19 billion dollars in 2018 and 11 billion dollars in 2019 respectively now what do their numbers have to say metric number one we want their average return on Capital in the last five years to be above 14 the average business earns around a seven percent return on Capital looking for a benchmark that's double this can build in margin of safety based on the quality of the business over the long run over the course of decades a Stock's likely to return what its underlying business returns these business returns are captured by return on Capital broadcom saw their returns dip into their fiscal 2020.
some of this was done because of the accounting for their Acquisitions since 2020 their Returns on Capital have really soared they earned around 23 percent in their last fiscal year in their last 12 months they earned around 26 percent even though that doesn't show on this chart despite those High returns today when these last five fiscal years are averaged out broadcom earns 12 and a half percent Returns on Capital just slightly below the Benchmark we're looking for but solidly above an average business even still this is an x on Metric number one metric number two we're looking for growth to go along with their Returns on Capital and boy broadcom has grown big time through these Acquisitions in the last five years their revenues have grown 68 their net incomes or their earnings have grown by a smaller 12 percent but the real start of the show is broadcom's free cash flows these have doubled in this time frame free cash flows the lifeblood of any business it's ultimately how businesses are valued we'll use two different methods based on their free cash flows later in our analysis to estimate a fair value for broadcom so you won't want to miss the end of the video all three of these are up this is growth across the board a solid check our first of the day on Metric number two metric number three we're looking at broadcom from the view of an individual shareholder we want to see earnings per share growth in the last five years in this time we learned broadcom's growing their earnings or their net incomes by 12 percent they've also bought back a small two percent of their shares despite their big recent acquisitions the company's not deluding shareholders not pictured on the graph here broadcom's last 12 months of earnings per share are actually higher than where they were at in 2018 they've grown these over this time this is a check on Metric number three metric number four we want to see free cash flow per share growth in the last five years they've doubled their free free cash flows over this time and had these small share BuyBacks they've grown their free cash flows per share this is a check on Metric number four to recap where we are currently through four metrics we have three checks and Only One X for broadcast how will the business keep performing during recessions it's businesses with a lot of debt that can have the biggest losses and potentially even go bankrupt metric number five we want broadcom's net debt which is their total debt minus their cash and their short-term Investments to be below the sum of their free cash flows in their last five fiscal years broadcom added on some debt to fuel their Acquisitions they peaked at around 34 billion dollars of net debt in 2020.
right now they have just under 28 billion dollars of net debt in this time when we add up all their free cash flows broadcoms generated 58.7 billion dollars of free cash flow that's more than double their current debt position meaning broadcom's free cash flows are able to support their debt loads this is a strong sign for the business this is a check on Metric number five in their last 12 months broadcoms produced around 17 billion dollars of free cash flow before we get to the first of two different ways we're valuing broadcom we can't forget about our bonus for our bonus we want broadcom's dividends to be supported by their free cash flows right now broadcom pays an above average 2.01 dividend yield in the last five years they've more than doubled their dividend at the same time they've doubled their free cash flows broadcom's also easily supported these in all five years they've maintained a healthy dividend payout ratio broadcom supported their dividend in all five years and that's the case today this is what we're looking for it's a check on our bonus broadcom's been a dividend growth stock they're potentially a future dividend Aristocrat or maybe even one day a dividend King keep in mind this is a snapshot of their last five years of performance and it's no guarantee for their future the big metric of the mall metric number six we want broadcom's average five-year free cash flow divided by their Enterprise Value to give us a yield that's above five percent if this is the case this gives a slight risk premium to the yield of the 10-year treasury it's the first of two different ways we're estimating a fair value for broadcom right now broadcom has a 395 billion dollar Enterprise Value their Enterprise Value has almost doubled from their 52-week lows it looks at broadcom similar to it being a private company it accounts for both their market cap and their net debt position in the last five years we learned broadcom produced 58.7 billion dollars of free cash flow this means in an average year they produce around 11.7 billion dollars of free cash flow when that's divided by their Enterprise Value we get around a three percent average free cash flow to Enterprise Value yield on a current basis broadcom produced 17 billion dollars of free cash flow in their last 12 months when that's divided by their 395 billion dollar Enterprise Value we get around a 4.3 percent current free cash flow to Enterprise Value yield that's slightly above the yield from the 10-year treasury but each of these are down from their risk premium we're looking for this means on Metric number six this is an X for broadcom but don't just throw the business out we still need to estimate their fair value per share and talk about our rating everything we've discussed so far is important but there's something missing that in my opinions the main reason to analyze broadcom which takes us on to using a discounted cash flow model to estimate their fair value per share a DCF model is based on the predictability of a company's free cash flows like any model in any discipline its outputs are sensitive to its inputs we're starting with an average of broadcom's last three fiscal years worth of free cash flow then using historical assumptions to grow these into the future it's up to you to figure out if these are going to be accurate or not for broadcom broadcom's been a moderately predictable business in their past even with a lot of their growth coming from their Acquisitions if we assume they grow their three-year free cash flows at a rate of 18 annually for the next decade then this growth rate Falls to eight percent annually for the following decade fair warning this is a very high growth rate for such a big company they'd likely need to make some big splashy Acquisitions to fuel this but that's not a guarantee if we want a 15 percent rate of return which is what Warren Buffett looks for from his investments from today's valuation multiples if these are the same 20 years into the future an estimate of broadcom's fair value per share is around 674 dollars this is down 200 from their current stock price yet it's well within the range of where they've traded in the last year keep in mind some key points just because broadcom's been somewhat predictable in their past isn't a guarantee for the future this discount rate is an estimate of total returns to shareholders based on broadcom's free cash flows it includes both their average dividend yield and any potential gains in their stock price again it's up to you to double check and verify or disconfirm these assumptions most importantly this analysis is not Financial advice it's not a buy or sell recommendation of any security consult with your financial advisor before making any investment decision in just a minute we'll talk about our final rating for broadcom but we need to address something first broadcom's numbers look pretty good but the qualitative factors are even more important for this business why don't we find out what they are looking at the factors supporting a long thesis number one broadcom boasts strong placement into Apple Hardware products with its radio frequency Wi-Fi and Bluetooth chips its filters that sell exclusively into the iPhone are best of breed number two broadcom is the largest Merchant chip maker for networking applications anime hold a solid technology lead over smaller competitors number three broadcom is a poster child for operating efficiency it earns excellent operating margins and generates enormous cash flow it's particularly strong at acquiring companies and trimming excess expenses but it wouldn't be fair if we didn't cover the negatives of their business as well looking at the factors supporting a short thesis number one broadcom relies heavily on Acquisitions to expand its portfolio yet tends to focus more on expense cutting rather than seeking strategic synergies for its deals number two broadcom software portfolio predominantly serves smaller low growth markets and its Symantec business has struggled in the cloud transition number 3 broadcom has sizable exposures to businesses with no moats like its broadband and storage chips for a more recent update on the company broadcom expects its 69 billion dollar VMware acquisition to still close as planned on October 30th this comes following news that the EU is set to clear broadcom's acquisition even though broadcom reportedly has plans to dramatically cut jobs at VMware there you have it for a balanced perspective of some of broadcom's qualitative factors now let's talk about our rating we learned through analyzing broadcom stock ticker avgo this company has grown on the back of some serious Acquisitions throughout its history they made nearly 30 billion dollars of Acquisitions in 2018 and 2019 they amp this up more recently with the proposed 69 billion dollar acquisition of VMware which is still set to close as a disclaimer that's not set in stone and is subject to change broadcom's financials reflect that they've done a good job of bringing these Acquisitions into their fold they earn solidly above average Returns on Capital total their free cash flows lead their growth by a lot they've also bought back a slight amount of shares they have a low amount of debt compared to the free cash flow they produced in their last five years they've also supported a growing dividend as a good candidate as a dividend growth stock with dividend royalty potentially in their future it's worth reiterating this analysis is not Financial advice based on broadcom's free cash flow to Enterprise Value that doesn't look attractive compared to the 10-year treasury when we performed our discounted cash flow analysis if we want a 15 rate of return based on today's valuation multiples if these are the same 20 years into the future and using those assumptions it looks like an estimate of broadcom's fair value is around 674 dollars per share down two hundred dollars from their current stock price keep in mind that doesn't include their VMware acquisition that discount rate surprisingly is dramatically underperforming how broadcom has fared since being a public business when we look at all the factors of our analysis broadcom looks like a strong candidate for further research there a lot of moving parts and a lot of M A activity in the business but they've had strong operating results to back these up thanks so much for watching and learning about broadcom with me subscribe to the channel for more videos and check out this next one
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