Last update on 2024-06-14

Broadcom (AVGO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Explore the Piotroski F-Score analysis of Broadcom (AVGO) for the year 2023, with an impressive final score of 8/9 showcasing robust financial health.

Short Analysis - Piotroski Score: 8

We're running Broadcom (AVGO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a rating out of 9 that measures a company's financial strength based on profitability, liquidity, and operational efficiency. Broadcom's (AVGO) score is 8, indicating a strong position. Key factors include positive net income, growth in operating cash flow, an improved return on assets, and reduced leverage. However, a slight dilution of shares was noted. Overall, Broadcom shows positive trends in profitability and liquidity.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score, which measures nine areas of a company's financial health, Broadcom's high score of 8 suggests it is a strong investment candidate. The company demonstrates robust profitability, operating efficiency, and improving liquidity. Although there is a slight concern over share dilution, the overall financial health appears solid. It is worth looking into Broadcom further as a potential stock for investment.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Broadcom (AVGO)

Company has a positive net income?

Net income is an essential indicator of a company's profitability. It not only dictates a company's ability to generate profit but also impacts the stock price and investors' perceived value of the company.

For 2023, Broadcom's net income is $14,082,000,000, which is positive. Consequently, Broadcom earns 1 point for this criterion under the Piotroski Analysis. Reviewing the historical data from the past 17 years shows a volatile trend with significant fluctuations. Notable high points were recorded in 2018 and again from 2021 onwards, indicating potential growth phases. The dips, such as in 2016, align with known market conditions that have affected profitability. However, consistent positive net income since 2019 showcases a stable upward trend in Broadcom's profitability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a key indicator of the amount of cash generated by a company's regular business operations. A positive CFO is critical because it indicates that a company's core business activities are generating more cash than is being spent, which is essential for maintaining liquidity, funding ongoing operations, and pursuing growth initiatives.

Broadcom's CFO in 2023 stands at a positive $18,085,000,000. Historically, Broadcom has shown a consistent upward trend in its CFO over the last 20 years. For instance, in 2007, the CFO was $146 million, whereas in 2015, it jumped to $2.318 billion, and in 2020 it rose further to $12.061 billion. This steady increase is a positive sign and highlights the robustness and scalability of Broadcom's business model. Thus, for the Piotroski score, Broadcom earns 1 point for having a positive CFO in 2023.

Return on Assets (ROA) are growing?

Examines the change in the company's Return on Assets (ROA) between consecutive years.

For Broadcom (AVGO), the ROA improved from 0.1545 in 2022 to 0.1928 in 2023. This translates into a 1 point increase based on the Piotroski F-Score criteria. Such an enhancement in ROA signals broadening efficiency in converting assets into net earnings, which is positive. However, it is crucial to note that although Broadcom's ROA has improved, it remains significantly lower than the industry median ROA, which hovered around 0.4919 in 2023. Operating cash flow has also demonstrated a steady upward trajectory, rising from $146 million in 2007 to $18,085 million in 2023, indicating solid financial performance.

Operating Cashflow are higher than Netincome?

Comparing Operating Cash Flow (OCF) to Net Income is essential as it provides insight into a company's capacity to generate cash from daily operations relative to its profitability, indicating the quality of earnings.

In 2023, Broadcom's Operating Cash Flow stood at $18,085,000,000, surpassing its Net Income of $14,082,000,000. This is indicative of healthy operating activities and results in a score of 1 under this criterion. Over the past 20 years, OCF has shown a consistent upward trend, reflecting robust operational efficiency. For instance, Broadcom’s OCF has catapulted from a meager $146,000,000 in 2007 to the current figure, highlighting consistent cash generation prowess. Notably, during turbulent years where Net Income was negative or substantially lower like 2016, OCF still recorded solid figures, underscoring the company's resilience and strong operational foundation. This consistency in OCF outperforming Net Income affirms the company's quality of earnings and liquidity health.

Liquidity of Broadcom (AVGO)

Leverage is declining?

Change in leverage is evaluated by comparing a company's debt levels from one year to the next.

For Broadcom (AVGO), leverage has marginally decreased from 0.5335 in 2022 to 0.5163 in 2023. This slight reduction indicates a minor improvement in the company's debt management for the current year. Over the last decade, Broadcom's leverage saw a substantial increase starting around 2014. This increment might imply the company had been accumulating debt, possibly to fund acquisitions or operational expansions. Following a peak in 2022, the downturn in 2023, albeit slight, can be seen positively as it suggests the firm's reducing its debt burden, albeit marginally. Hence, AVGO earns 1 point for this criterion.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets. The higher the Current Ratio, the higher the liquidity.

For Broadcom (AVGO), the Current Ratio in 2023 was 2.8153, up from 2.6239 in 2022. This represents an increase indicating better short-term liquidity. If we look at the broader trend over the past 20 years, Broadcom has shown variability in its Current Ratio, ranging from a low of 1.3649 in 2009 to a high of 6.2566 in 2017. Compared to the industry median current ratio for the same timeframe, it has mostly been below the industry median, which has hovered between 2.5473 and 3.7406. Despite the variability, the improvement from 2022 to 2023 positively impacts its liquidity score in the Piotroski analysis. Therefore, Broadcom receives 1 point for this criterion.

Number of shares not diluted?

Change in shares outstanding evaluates if the number of shares has decreased. Decreasing shares indicate buybacks, which are usually seen positively by investors.

On examining the shares of Broadcom (AVGO), the outstanding shares have increased from 410,025,054 in 2022 to 415,000,000 in 2023. This represents an increase in outstanding shares, hence no points are awarded here. Historically, Broadcom's shares have generally followed an upward trajectory since 2007, adjusting for the strategic decisions like stock splits or acquisitions. For instance, after a notable increase in shares from 252 million in 2011 to 421 million in 2017, there was a slight decrease back to 397,999,992 in 2019 and another increase after 2021 to the current amount. Consequently, given the context, this trend may reflect the company raising capital, although dilutive, which may be aimed at fueling its expansion or strategic investments.

Operating of Broadcom (AVGO)

Cross Margin is growing?

Gross Margin measures a company's financial health and efficiency in controlling production costs. It shows the profitability of a company's core activities.

In 2023, Broadcom (AVGO) reported a Gross Margin of 0.6893, up from 0.6655 in 2022. This increase represents a positive trend, suggesting that Broadcom has improved its production efficiency and cost control. Over the last 17 years, Broadcom's Gross Margin has consistently been above the industry median values, indicating strong competitive positioning. For instance, in 2015, Broadcom had a gross margin of 0.5207 compared to an industry median of 0.4645, evidencing its sustained superior performance in managing production costs. This trend is favorable, earning Broadcom 1 point in the Piotroski analysis.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets to generate sales or revenue. It is calculated by dividing sales by total assets.

In 2023, Broadcom's Asset Turnover increased to 0.4903 from 0.4462 in 2022, indicating a more efficient use of assets to generate sales. This 0.0441 increase (from 0.4462 to 0.4903) is a positive trend and adds 1 point to Piotroski's score. Historically, Broadcom's Asset Turnover fluctuated, peaking at 1.015 in 2011 and reaching its lowest in recent years, but the current trend is favorable.