Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
-- Broadcom Corporation
) has been reiterated by TheStreet Ratings as a buy with a ratings score of B- . The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- BRCM's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, BRCM has a quick ratio of 2.00, which demonstrates the ability of the company to cover short-term liquidity needs.
- BROADCOM CORP's earnings per share declined by 9.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BROADCOM CORP reported lower earnings of $1.64 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($2.93 versus $1.64).
- The gross profit margin for BROADCOM CORP is rather high; currently it is at 52.50%. Regardless of BRCM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BRCM's net profit margin of 8.10% is significantly lower than the same period one year prior.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
Broadcom Corporation designs and develops semiconductor solutions for wired and wireless communications. It provides a portfolio of system-on-a-chip (SoC) and software solutions. The company has a P/E ratio of 22.8, below the average electronics industry P/E ratio of 26.9 and above the S&P 500 P/E ratio of 17.7. Broadcom has a market cap of $18.72 billion and is part of the
industry. Shares are up 25.7% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.
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