Intrinsic value of Broadcom - AVGO

Previous Close

$266.39

  Intrinsic Value

$624.06

stock screener

  Rating & Target

str. buy

+134%

Previous close

$266.39

 
Intrinsic value

$624.06

 
Up/down potential

+134%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AVGO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  33.20
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  17,636
  20,652
  23,933
  27,476
  31,273
  35,319
  39,609
  44,136
  48,898
  53,889
  59,110
  64,559
  70,239
  76,151
  82,301
  88,694
  95,338
  102,243
  109,418
  116,876
  124,631
  132,695
  141,087
  149,823
  158,920
  168,400
  178,283
  188,591
  199,348
  210,577
  222,306
Variable operating expenses, $m
 
  7,322
  8,093
  8,925
  9,817
  10,768
  11,775
  12,839
  13,957
  15,130
  16,356
  15,166
  16,500
  17,889
  19,333
  20,835
  22,396
  24,018
  25,704
  27,456
  29,277
  31,172
  33,143
  35,195
  37,332
  39,559
  41,881
  44,302
  46,829
  49,467
  52,222
Fixed operating expenses, $m
 
  9,258
  9,489
  9,726
  9,970
  10,219
  10,474
  10,736
  11,005
  11,280
  11,562
  11,851
  12,147
  12,451
  12,762
  13,081
  13,408
  13,743
  14,087
  14,439
  14,800
  15,170
  15,549
  15,938
  16,336
  16,745
  17,163
  17,593
  18,032
  18,483
  18,945
Total operating expenses, $m
  15,419
  16,580
  17,582
  18,651
  19,787
  20,987
  22,249
  23,575
  24,962
  26,410
  27,918
  27,017
  28,647
  30,340
  32,095
  33,916
  35,804
  37,761
  39,791
  41,895
  44,077
  46,342
  48,692
  51,133
  53,668
  56,304
  59,044
  61,895
  64,861
  67,950
  71,167
Operating income, $m
  2,217
  4,072
  6,351
  8,824
  11,486
  14,333
  17,359
  20,561
  23,936
  27,480
  31,192
  37,543
  41,592
  45,812
  50,205
  54,778
  59,534
  64,482
  69,628
  74,982
  80,553
  86,354
  92,395
  98,690
  105,252
  112,096
  119,239
  126,696
  134,486
  142,627
  151,139
EBITDA, $m
  6,954
  8,678
  11,297
  14,136
  17,191
  20,456
  23,926
  27,596
  31,463
  35,523
  39,775
  44,219
  48,855
  53,687
  58,716
  63,950
  69,393
  75,055
  80,943
  87,068
  93,442
  100,076
  106,985
  114,183
  121,686
  129,511
  137,676
  146,199
  155,101
  164,403
  174,128
Interest expense (income), $m
  310
  610
  814
  1,035
  1,274
  1,531
  1,804
  2,094
  2,399
  2,721
  3,058
  3,410
  3,778
  4,162
  4,561
  4,976
  5,407
  5,856
  6,322
  6,807
  7,310
  7,834
  8,378
  8,945
  9,534
  10,149
  10,789
  11,456
  12,152
  12,878
  13,636
Earnings before tax, $m
  1,825
  3,462
  5,537
  7,789
  10,212
  12,802
  15,555
  18,468
  21,537
  24,759
  28,134
  34,133
  37,814
  41,650
  45,645
  49,802
  54,127
  58,626
  63,306
  68,175
  73,243
  78,520
  84,017
  89,745
  95,717
  101,948
  108,450
  115,241
  122,334
  129,749
  137,503
Tax expense, $m
  35
  935
  1,495
  2,103
  2,757
  3,457
  4,200
  4,986
  5,815
  6,685
  7,596
  9,216
  10,210
  11,246
  12,324
  13,447
  14,614
  15,829
  17,093
  18,407
  19,776
  21,200
  22,685
  24,231
  25,844
  27,526
  29,282
  31,115
  33,030
  35,032
  37,126
Net income, $m
  1,692
  2,527
  4,042
  5,686
  7,455
  9,346
  11,355
  13,482
  15,722
  18,074
  20,538
  24,917
  27,604
  30,405
  33,321
  36,355
  39,513
  42,797
  46,213
  49,768
  53,468
  57,320
  61,332
  65,514
  69,874
  74,422
  79,169
  84,126
  89,304
  94,717
  100,377

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11,204
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  54,418
  50,617
  58,660
  67,342
  76,650
  86,567
  97,081
  108,178
  119,847
  132,082
  144,878
  158,234
  172,154
  186,645
  201,718
  217,387
  233,672
  250,595
  268,182
  286,462
  305,467
  325,234
  345,802
  367,212
  389,511
  412,746
  436,968
  462,233
  488,597
  516,121
  544,869
Adjusted assets (=assets-cash), $m
  43,214
  50,617
  58,660
  67,342
  76,650
  86,567
  97,081
  108,178
  119,847
  132,082
  144,878
  158,234
  172,154
  186,645
  201,718
  217,387
  233,672
  250,595
  268,182
  286,462
  305,467
  325,234
  345,802
  367,212
  389,511
  412,746
  436,968
  462,233
  488,597
  516,121
  544,869
Revenue / Adjusted assets
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
Average production assets, $m
  15,504
  18,153
  21,037
  24,151
  27,489
  31,046
  34,816
  38,796
  42,981
  47,369
  51,958
  56,748
  61,740
  66,937
  72,342
  77,962
  83,802
  89,871
  96,179
  102,734
  109,550
  116,639
  124,016
  131,694
  139,691
  148,024
  156,711
  165,772
  175,227
  185,098
  195,407
Working capital, $m
  13,294
  2,581
  2,992
  3,434
  3,909
  4,415
  4,951
  5,517
  6,112
  6,736
  7,389
  8,070
  8,780
  9,519
  10,288
  11,087
  11,917
  12,780
  13,677
  14,610
  15,579
  16,587
  17,636
  18,728
  19,865
  21,050
  22,285
  23,574
  24,918
  26,322
  27,788
Total debt, $m
  17,548
  23,251
  29,580
  36,413
  43,738
  51,543
  59,818
  68,551
  77,735
  87,363
  97,434
  107,945
  118,900
  130,305
  142,167
  154,499
  167,315
  180,633
  194,474
  208,860
  223,817
  239,374
  255,561
  272,411
  289,960
  308,246
  327,309
  347,192
  367,941
  389,602
  412,227
Total liabilities, $m
  34,133
  39,836
  46,165
  52,998
  60,323
  68,128
  76,403
  85,136
  94,320
  103,948
  114,019
  124,530
  135,485
  146,890
  158,752
  171,084
  183,900
  197,218
  211,059
  225,445
  240,402
  255,959
  272,146
  288,996
  306,545
  324,831
  343,894
  363,777
  384,526
  406,187
  428,812
Total equity, $m
  20,285
  10,781
  12,495
  14,344
  16,326
  18,439
  20,678
  23,042
  25,527
  28,133
  30,859
  33,704
  36,669
  39,755
  42,966
  46,303
  49,772
  53,377
  57,123
  61,016
  65,064
  69,275
  73,656
  78,216
  82,966
  87,915
  93,074
  98,456
  104,071
  109,934
  116,057
Total liabilities and equity, $m
  54,418
  50,617
  58,660
  67,342
  76,649
  86,567
  97,081
  108,178
  119,847
  132,081
  144,878
  158,234
  172,154
  186,645
  201,718
  217,387
  233,672
  250,595
  268,182
  286,461
  305,466
  325,234
  345,802
  367,212
  389,511
  412,746
  436,968
  462,233
  488,597
  516,121
  544,869
Debt-to-equity ratio
  0.865
  2.160
  2.370
  2.540
  2.680
  2.800
  2.890
  2.980
  3.050
  3.110
  3.160
  3.200
  3.240
  3.280
  3.310
  3.340
  3.360
  3.380
  3.400
  3.420
  3.440
  3.460
  3.470
  3.480
  3.490
  3.510
  3.520
  3.530
  3.540
  3.540
  3.550
Adjusted equity ratio
  0.210
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,692
  2,527
  4,042
  5,686
  7,455
  9,346
  11,355
  13,482
  15,722
  18,074
  20,538
  24,917
  27,604
  30,405
  33,321
  36,355
  39,513
  42,797
  46,213
  49,768
  53,468
  57,320
  61,332
  65,514
  69,874
  74,422
  79,169
  84,126
  89,304
  94,717
  100,377
Depreciation, amort., depletion, $m
  4,737
  4,606
  4,946
  5,312
  5,705
  6,123
  6,567
  7,035
  7,527
  8,043
  8,583
  6,676
  7,264
  7,875
  8,511
  9,172
  9,859
  10,573
  11,315
  12,086
  12,888
  13,722
  14,590
  15,493
  16,434
  17,415
  18,437
  19,503
  20,615
  21,776
  22,989
Funds from operations, $m
  5,926
  7,133
  8,988
  10,998
  13,159
  15,469
  17,922
  20,516
  23,249
  26,118
  29,121
  31,593
  34,868
  38,280
  41,832
  45,527
  49,372
  53,370
  57,528
  61,854
  66,356
  71,042
  75,922
  81,007
  86,308
  91,836
  97,605
  103,628
  109,919
  116,493
  123,366
Change in working capital, $m
  -625
  377
  410
  443
  475
  506
  536
  566
  595
  624
  653
  681
  710
  739
  769
  799
  831
  863
  897
  932
  969
  1,008
  1,049
  1,092
  1,137
  1,185
  1,235
  1,288
  1,345
  1,404
  1,466
Cash from operations, $m
  6,551
  6,756
  8,578
  10,555
  12,685
  14,963
  17,386
  19,950
  22,654
  25,494
  28,469
  30,912
  34,158
  37,540
  41,063
  44,728
  48,541
  52,507
  56,631
  60,922
  65,387
  70,034
  74,873
  79,915
  85,171
  90,651
  96,370
  102,340
  108,574
  115,089
  121,900
Maintenance CAPEX, $m
  0
  -1,824
  -2,136
  -2,475
  -2,841
  -3,234
  -3,652
  -4,096
  -4,564
  -5,057
  -5,573
  -6,113
  -6,676
  -7,264
  -7,875
  -8,511
  -9,172
  -9,859
  -10,573
  -11,315
  -12,086
  -12,888
  -13,722
  -14,590
  -15,493
  -16,434
  -17,415
  -18,437
  -19,503
  -20,615
  -21,776
New CAPEX, $m
  -1,069
  -2,649
  -2,884
  -3,114
  -3,338
  -3,557
  -3,770
  -3,980
  -4,185
  -4,388
  -4,589
  -4,790
  -4,992
  -5,197
  -5,406
  -5,620
  -5,840
  -6,069
  -6,307
  -6,556
  -6,816
  -7,089
  -7,376
  -7,679
  -7,997
  -8,333
  -8,687
  -9,061
  -9,455
  -9,871
  -10,310
Cash from investing activities, $m
  -674
  -4,473
  -5,020
  -5,589
  -6,179
  -6,791
  -7,422
  -8,076
  -8,749
  -9,445
  -10,162
  -10,903
  -11,668
  -12,461
  -13,281
  -14,131
  -15,012
  -15,928
  -16,880
  -17,871
  -18,902
  -19,977
  -21,098
  -22,269
  -23,490
  -24,767
  -26,102
  -27,498
  -28,958
  -30,486
  -32,086
Free cash flow, $m
  5,877
  2,284
  3,558
  4,966
  6,505
  8,172
  9,963
  11,875
  13,904
  16,049
  18,307
  20,009
  22,489
  25,080
  27,782
  30,598
  33,529
  36,579
  39,751
  43,051
  46,484
  50,057
  53,775
  57,647
  61,680
  65,884
  70,268
  74,842
  79,617
  84,604
  89,814
Issuance/(repayment) of debt, $m
  3,742
  5,820
  6,330
  6,833
  7,325
  7,805
  8,274
  8,733
  9,184
  9,629
  10,070
  10,511
  10,955
  11,404
  11,862
  12,332
  12,816
  13,318
  13,841
  14,386
  14,957
  15,557
  16,187
  16,850
  17,549
  18,286
  19,063
  19,883
  20,748
  21,661
  22,624
Issuance/(repurchase) of shares, $m
  257
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  3,975
  5,820
  6,330
  6,833
  7,325
  7,805
  8,274
  8,733
  9,184
  9,629
  10,070
  10,511
  10,955
  11,404
  11,862
  12,332
  12,816
  13,318
  13,841
  14,386
  14,957
  15,557
  16,187
  16,850
  17,549
  18,286
  19,063
  19,883
  20,748
  21,661
  22,624
Total cash flow (excl. dividends), $m
  9,852
  8,103
  9,888
  11,799
  13,830
  15,977
  18,237
  20,608
  23,088
  25,678
  28,377
  30,521
  33,444
  36,484
  39,645
  42,930
  46,345
  49,897
  53,592
  57,437
  61,441
  65,613
  69,962
  74,497
  79,229
  84,170
  89,332
  94,726
  100,365
  106,265
  112,438
Retained Cash Flow (-), $m
  -1,393
  -1,583
  -1,713
  -1,849
  -1,982
  -2,112
  -2,239
  -2,364
  -2,486
  -2,606
  -2,726
  -2,845
  -2,965
  -3,087
  -3,211
  -3,338
  -3,469
  -3,605
  -3,746
  -3,894
  -4,048
  -4,210
  -4,381
  -4,560
  -4,750
  -4,949
  -5,159
  -5,381
  -5,616
  -5,863
  -6,123
Prev. year cash balance distribution, $m
 
  11,087
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  17,607
  8,174
  9,950
  11,848
  13,865
  15,998
  18,244
  20,603
  23,072
  25,652
  27,676
  30,479
  33,398
  36,434
  39,592
  42,876
  46,292
  49,846
  53,544
  57,393
  61,403
  65,581
  69,936
  74,480
  79,221
  84,172
  89,344
  94,750
  100,402
  106,315
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  16,881
  7,483
  8,659
  9,756
  10,747
  11,610
  12,326
  12,877
  13,254
  13,448
  13,143
  13,007
  12,698
  12,232
  11,624
  10,896
  10,072
  9,180
  8,244
  7,293
  6,351
  5,441
  4,584
  3,793
  3,082
  2,456
  1,918
  1,466
  1,096
  801
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Broadcom Limited is a designer, developer and global supplier of a range of semiconductor devices with a focus on digital and mixed signal complementary metal oxide semiconductor (CMOS)-based devices and analog III-V based products. The Company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. It offers a range of products that are used in end-products, such as enterprise and data center networking, home connectivity, set-top boxes (STBs), broadband access, telecommunication equipment, smartphones, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Its product portfolio ranges from discrete devices to complex sub-systems that include multiple device types, and also includes firmware for interfacing between analog and digital systems. Its products include mechanical hardware that interfaces with optoelectronic or capacitive sensors.

FINANCIAL RATIOS  of  Broadcom (AVGO)

Valuation Ratios
P/E Ratio 64.4
Price to Sales 6.2
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 16.6
Price to Free Cash Flow 19.9
Growth Rates
Sales Growth Rate 33.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 47.9%
Cap. Spend. - 3 Yr. Gr. Rate 21.2%
Financial Strength
Quick Ratio 96
Current Ratio 0.3
LT Debt to Equity 85.9%
Total Debt to Equity 86.5%
Interest Coverage 7
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 8.6%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 48.4%
Gross Margin - 3 Yr. Avg. 48.6%
EBITDA Margin 39%
EBITDA Margin - 3 Yr. Avg. 30.6%
Operating Margin 12.6%
Oper. Margin - 3 Yr. Avg. 10.8%
Pre-Tax Margin 10.3%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 9.6%
Net Profit Margin - 3 Yr. Avg. 5.5%
Effective Tax Rate 1.9%
Eff/ Tax Rate - 3 Yr. Avg. -17%
Payout Ratio 103.1%

AVGO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVGO stock intrinsic value calculation we used $17636 million for the last fiscal year's total revenue generated by Broadcom. The default revenue input number comes from 2017 income statement of Broadcom. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AVGO stock valuation model: a) initial revenue growth rate of 17.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AVGO is calculated based on our internal credit rating of Broadcom, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Broadcom.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AVGO stock the variable cost ratio is equal to 37.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9032 million in the base year in the intrinsic value calculation for AVGO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Broadcom.

Corporate tax rate of 27% is the nominal tax rate for Broadcom. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AVGO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AVGO are equal to 87.9%.

Life of production assets of 8.5 years is the average useful life of capital assets used in Broadcom operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AVGO is equal to 12.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $20285 million for Broadcom - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 413.585 million for Broadcom is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Broadcom at the current share price and the inputted number of shares is $110.2 billion.

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COMPANY NEWS

▶ Will the Qualcomm-NXP Deal Be Free at Last?   [09:03AM  Market Realist]
▶ Reports: FTC probing Broadcom for anti-competitive tactics   [09:25AM  American City Business Journals]
▶ [$$] FTC Probes Broadcom Over Negotiations With Customers   [04:23PM  The Wall Street Journal]
▶ Why Counting Bases Is A Crucial Skill In Playing Long, Winning Stock Rallies   [Jan-16-18 09:30PM  Investor's Business Daily]
▶ Broadcom Issues Statement   [12:28PM  PR Newswire]
▶ Qualcomm's Stock Heads to a Crossroads   [06:00AM  Investopedia]
▶ Barron's Roundtable: Bright Outlook for Stocks   [Jan-13-18 12:01AM  Barrons.com]
▶ What's Up With Qualcomm's Bid for NXP Semiconductors?   [Jan-12-18 08:09PM  Motley Fool]
▶ 2 Dividend Stocks I'd Buy Right Now   [05:30PM  Motley Fool]
▶ Apple Poised to Gain 14%, Defying Skeptics   [06:00AM  Investopedia]
▶ Qualcomm, Inc. Stock Is More Than Just a Takeover Target   [Jan-11-18 01:31PM  InvestorPlace]
▶ These Stocks Can Win Big With Apple in 2018   [Jan-10-18 01:12PM  Motley Fool]
▶ [$$] Mega Chip Deal Alarms Some Chinese Smartphone Makers   [12:48AM  The Wall Street Journal]
▶ [$$] Chinese Smartphone Makers Raise Concerns About a Mega Chip Deal   [Jan-09-18 01:26PM  The Wall Street Journal]
▶ Bernstein announces its 5 conviction buys   [12:40PM  CNBC Videos]
▶ Pot, bitcoin, Micron all speculative   [07:21PM  CNBC Videos]
▶ Sorry Bulls, but You Must Remain Cautious on Broadcom   [Jan-03-18 04:42PM  TheStreet.com]
▶ Why Apple iPhone X Worries Maybe Overblown   [06:00AM  Investopedia]
▶ Composite Rating For Broadcom Rises To 96   [03:00AM  Investor's Business Daily]
▶ 5 Reasons I'm Buying Cypress Semiconductor Stock   [Dec-30-17 03:31PM  Motley Fool]
▶ "Fast Money" final trades: PEP, WDC and more   [Dec-27-17 05:59PM  CNBC Videos]
▶ Wall Street Analysts Identify Top Chip Takeover Targets For 2018   [Dec-26-17 04:40PM  Investor's Business Daily]
▶ Qualcomm rejects Broadcom's slate   [10:39AM  Reuters Videos]
Financial statements of AVGO
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