Intrinsic value of Broadcom - AVGO

Previous Close

$209.27

  Intrinsic Value

$1,311

stock screener

  Rating & Target

str. buy

+526%

Previous close

$209.27

 
Intrinsic value

$1,311

 
Up/down potential

+526%

 
Rating

str. buy

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

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 84.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
  30.38
  27.84
  25.56
  23.50
  21.65
  19.99
  18.49
  17.14
  15.93
  14.83
  13.85
  12.96
  12.17
  11.45
  10.81
  10.23
  9.70
  9.23
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
Revenue, $m
  23,491
  30,628
  39,155
  49,162
  60,716
  73,863
  88,625
  105,010
  123,008
  142,598
  163,749
  186,427
  210,597
  236,222
  263,272
  291,722
  321,552
  352,752
  385,321
  419,265
  454,603
  491,360
  529,573
  569,288
  610,558
  653,447
  698,025
  744,372
  792,577
  842,733
Variable operating expenses, $m
  7,394
  8,561
  9,955
  11,591
  13,480
  15,630
  18,043
  20,722
  23,665
  26,867
  26,772
  30,479
  34,431
  38,620
  43,043
  47,694
  52,571
  57,672
  62,997
  68,546
  74,324
  80,333
  86,581
  93,074
  99,821
  106,833
  114,121
  121,699
  129,580
  137,780
Fixed operating expenses, $m
  9,210
  9,413
  9,620
  9,832
  10,048
  10,269
  10,495
  10,726
  10,962
  11,203
  11,449
  11,701
  11,959
  12,222
  12,491
  12,765
  13,046
  13,333
  13,627
  13,926
  14,233
  14,546
  14,866
  15,193
  15,527
  15,869
  16,218
  16,575
  16,939
  17,312
Total operating expenses, $m
  16,604
  17,974
  19,575
  21,423
  23,528
  25,899
  28,538
  31,448
  34,627
  38,070
  38,221
  42,180
  46,390
  50,842
  55,534
  60,459
  65,617
  71,005
  76,624
  82,472
  88,557
  94,879
  101,447
  108,267
  115,348
  122,702
  130,339
  138,274
  146,519
  155,092
Operating income, $m
  6,886
  12,654
  19,580
  27,739
  37,188
  47,964
  60,087
  73,563
  88,382
  104,527
  125,528
  144,247
  164,207
  185,380
  207,739
  231,262
  255,935
  281,747
  308,697
  336,792
  366,046
  396,481
  428,127
  461,021
  495,210
  530,745
  567,686
  606,099
  646,058
  687,641
EBITDA, $m
  15,799
  23,194
  32,065
  42,507
  54,591
  68,366
  83,856
  101,069
  119,994
  140,608
  162,879
  186,771
  212,244
  239,262
  267,791
  297,804
  329,281
  362,210
  396,589
  432,427
  469,741
  508,560
  548,922
  590,876
  634,478
  679,796
  726,905
  775,890
  826,845
  879,869
Interest expense (income), $m
  310
  941
  1,496
  2,175
  2,986
  3,938
  5,037
  6,288
  7,692
  9,251
  10,963
  12,826
  14,838
  16,996
  19,295
  21,733
  24,306
  27,012
  29,850
  32,818
  35,916
  39,146
  42,507
  46,004
  49,639
  53,417
  57,343
  61,423
  65,664
  70,073
  74,659
Earnings before tax, $m
  5,945
  11,158
  17,405
  24,753
  33,250
  42,927
  53,800
  65,871
  79,131
  93,565
  112,702
  129,408
  147,211
  166,085
  186,006
  206,956
  228,922
  251,897
  275,879
  300,876
  326,901
  353,974
  382,123
  411,382
  441,793
  473,401
  506,263
  540,435
  575,985
  612,983
Tax expense, $m
  1,605
  3,013
  4,699
  6,683
  8,978
  11,590
  14,526
  17,785
  21,365
  25,262
  30,429
  34,940
  39,747
  44,843
  50,222
  55,878
  61,809
  68,012
  74,487
  81,236
  88,263
  95,573
  103,173
  111,073
  119,284
  127,818
  136,691
  145,917
  155,516
  165,505
Net income, $m
  4,340
  8,145
  12,706
  18,070
  24,273
  31,337
  39,274
  48,086
  57,766
  68,302
  82,272
  94,468
  107,464
  121,242
  135,785
  151,078
  167,113
  183,885
  201,392
  219,639
  238,637
  258,401
  278,950
  300,309
  322,509
  345,583
  369,572
  394,518
  420,469
  447,477

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  60,858
  79,347
  101,438
  127,364
  157,297
  191,354
  229,599
  272,048
  318,674
  369,424
  424,220
  482,972
  545,587
  611,974
  682,053
  755,757
  833,037
  913,866
  998,240
  1,086,179
  1,177,727
  1,272,954
  1,371,952
  1,474,840
  1,581,757
  1,692,867
  1,808,355
  1,928,426
  2,053,308
  2,183,247
Adjusted assets (=assets-cash), $m
  60,858
  79,347
  101,438
  127,364
  157,297
  191,354
  229,599
  272,048
  318,674
  369,424
  424,220
  482,972
  545,587
  611,974
  682,053
  755,757
  833,037
  913,866
  998,240
  1,086,179
  1,177,727
  1,272,954
  1,371,952
  1,474,840
  1,581,757
  1,692,867
  1,808,355
  1,928,426
  2,053,308
  2,183,247
Revenue / Adjusted assets
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
Average production assets, $m
  53,583
  69,862
  89,313
  112,139
  138,494
  168,481
  202,154
  239,529
  280,582
  325,265
  373,511
  425,240
  480,371
  538,823
  600,525
  665,418
  733,460
  804,628
  878,916
  956,344
  1,036,949
  1,120,793
  1,207,957
  1,298,546
  1,392,683
  1,490,512
  1,592,195
  1,697,914
  1,807,868
  1,922,274
Working capital, $m
  446
  582
  744
  934
  1,154
  1,403
  1,684
  1,995
  2,337
  2,709
  3,111
  3,542
  4,001
  4,488
  5,002
  5,543
  6,109
  6,702
  7,321
  7,966
  8,637
  9,336
  10,062
  10,816
  11,601
  12,415
  13,262
  14,143
  15,059
  16,012
Total debt, $m
  27,699
  40,272
  55,294
  72,923
  93,278
  116,437
  142,444
  171,308
  203,015
  237,524
  274,785
  314,737
  357,315
  402,459
  450,112
  500,230
  552,781
  607,745
  665,119
  724,918
  787,171
  851,925
  919,243
  989,207
  1,061,911
  1,137,465
  1,215,997
  1,297,646
  1,382,565
  1,470,924
Total liabilities, $m
  41,383
  53,956
  68,978
  86,607
  106,962
  130,121
  156,128
  184,992
  216,699
  251,208
  288,469
  328,421
  370,999
  416,143
  463,796
  513,914
  566,465
  621,429
  678,803
  738,602
  800,855
  865,609
  932,927
  1,002,891
  1,075,595
  1,151,149
  1,229,681
  1,311,330
  1,396,249
  1,484,608
Total equity, $m
  19,475
  25,391
  32,460
  40,756
  50,335
  61,233
  73,472
  87,055
  101,976
  118,216
  135,750
  154,551
  174,588
  195,832
  218,257
  241,842
  266,572
  292,437
  319,437
  347,577
  376,873
  407,345
  439,025
  471,949
  506,162
  541,717
  578,673
  617,096
  657,059
  698,639
Total liabilities and equity, $m
  60,858
  79,347
  101,438
  127,363
  157,297
  191,354
  229,600
  272,047
  318,675
  369,424
  424,219
  482,972
  545,587
  611,975
  682,053
  755,756
  833,037
  913,866
  998,240
  1,086,179
  1,177,728
  1,272,954
  1,371,952
  1,474,840
  1,581,757
  1,692,866
  1,808,354
  1,928,426
  2,053,308
  2,183,247
Debt-to-equity ratio
  1.420
  1.590
  1.700
  1.790
  1.850
  1.900
  1.940
  1.970
  1.990
  2.010
  2.020
  2.040
  2.050
  2.060
  2.060
  2.070
  2.070
  2.080
  2.080
  2.090
  2.090
  2.090
  2.090
  2.100
  2.100
  2.100
  2.100
  2.100
  2.100
  2.110
Adjusted equity ratio
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,340
  8,145
  12,706
  18,070
  24,273
  31,337
  39,274
  48,086
  57,766
  68,302
  82,272
  94,468
  107,464
  121,242
  135,785
  151,078
  167,113
  183,885
  201,392
  219,639
  238,637
  258,401
  278,950
  300,309
  322,509
  345,583
  369,572
  394,518
  420,469
  447,477
Depreciation, amort., depletion, $m
  8,912
  10,540
  12,485
  14,768
  17,403
  20,402
  23,769
  27,507
  31,612
  36,080
  37,351
  42,524
  48,037
  53,882
  60,052
  66,542
  73,346
  80,463
  87,892
  95,634
  103,695
  112,079
  120,796
  129,855
  139,268
  149,051
  159,219
  169,791
  180,787
  192,227
Funds from operations, $m
  13,252
  18,685
  25,191
  32,838
  41,676
  51,739
  63,043
  75,592
  89,378
  104,383
  119,623
  136,992
  155,501
  175,124
  195,837
  217,620
  240,459
  264,347
  289,283
  315,274
  342,332
  370,480
  399,745
  430,164
  461,777
  494,634
  528,791
  564,309
  601,256
  639,705
Change in working capital, $m
  111
  136
  162
  190
  220
  250
  280
  311
  342
  372
  402
  431
  459
  487
  514
  541
  567
  593
  619
  645
  671
  698
  726
  755
  784
  815
  847
  881
  916
  953
Cash from operations, $m
  13,141
  18,550
  25,029
  32,648
  41,456
  51,489
  62,762
  75,281
  89,036
  104,010
  119,221
  136,561
  155,042
  174,637
  195,323
  217,079
  239,893
  263,755
  288,665
  314,629
  341,661
  369,782
  399,019
  429,409
  460,993
  493,819
  527,944
  563,428
  600,340
  638,752
Maintenance CAPEX, $m
  -4,022
  -5,358
  -6,986
  -8,931
  -11,214
  -13,849
  -16,848
  -20,215
  -23,953
  -28,058
  -32,527
  -37,351
  -42,524
  -48,037
  -53,882
  -60,052
  -66,542
  -73,346
  -80,463
  -87,892
  -95,634
  -103,695
  -112,079
  -120,796
  -129,855
  -139,268
  -149,051
  -159,219
  -169,791
  -180,787
New CAPEX, $m
  -13,360
  -16,279
  -19,451
  -22,826
  -26,355
  -29,987
  -33,674
  -37,374
  -41,053
  -44,683
  -48,246
  -51,729
  -55,130
  -58,452
  -61,702
  -64,893
  -68,042
  -71,167
  -74,289
  -77,427
  -80,605
  -83,844
  -87,165
  -90,589
  -94,137
  -97,829
  -101,683
  -105,719
  -109,954
  -114,407
Cash from investing activities, $m
  -17,382
  -21,637
  -26,437
  -31,757
  -37,569
  -43,836
  -50,522
  -57,589
  -65,006
  -72,741
  -80,773
  -89,080
  -97,654
  -106,489
  -115,584
  -124,945
  -134,584
  -144,513
  -154,752
  -165,319
  -176,239
  -187,539
  -199,244
  -211,385
  -223,992
  -237,097
  -250,734
  -264,938
  -279,745
  -295,194
Free cash flow, $m
  -4,242
  -3,087
  -1,408
  890
  3,887
  7,653
  12,241
  17,691
  24,030
  31,269
  38,449
  47,481
  57,388
  68,149
  79,739
  92,134
  105,308
  119,241
  133,913
  149,310
  165,421
  182,243
  199,775
  218,024
  237,001
  256,722
  277,210
  298,490
  320,594
  343,559
Issuance/(repayment) of debt, $m
  10,268
  12,572
  15,022
  17,629
  20,354
  23,159
  26,007
  28,865
  31,706
  34,510
  37,261
  39,951
  42,578
  45,143
  47,654
  50,118
  52,550
  54,964
  57,374
  59,799
  62,253
  64,754
  67,319
  69,963
  72,704
  75,555
  78,532
  81,649
  84,920
  88,358
Issuance/(repurchase) of shares, $m
  507
  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  
  10,775
  12,572
  15,022
  17,629
  20,354
  23,159
  26,007
  28,865
  31,706
  34,510
  37,261
  39,951
  42,578
  45,143
  47,654
  50,118
  52,550
  54,964
  57,374
  59,799
  62,253
  64,754
  67,319
  69,963
  72,704
  75,555
  78,532
  81,649
  84,920
  88,358
Total cash flow (excl. dividends), $m
  6,533
  9,485
  13,614
  18,519
  24,242
  30,812
  38,248
  46,556
  55,736
  65,779
  75,710
  87,432
  99,966
  113,292
  127,392
  142,252
  157,859
  174,205
  191,288
  209,108
  227,674
  246,997
  267,094
  287,988
  309,705
  332,277
  355,742
  380,139
  405,514
  431,917
Retained Cash Flow (-), $m
  -4,847
  -5,916
  -7,069
  -8,296
  -9,579
  -10,898
  -12,238
  -13,583
  -14,921
  -16,240
  -17,535
  -18,801
  -20,037
  -21,244
  -22,425
  -23,585
  -24,730
  -25,865
  -27,000
  -28,140
  -29,295
  -30,472
  -31,679
  -32,924
  -34,214
  -35,555
  -36,956
  -38,423
  -39,962
  -41,580
Prev. year cash balance distribution, $m
  8,558
  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
  917
  1,222
  1,593
  2,036
  2,556
  3,157
  3,841
  4,609
  5,461
  6,396
  7,415
  8,515
  9,694
  10,951
  12,284
  13,690
  15,170
  16,721
  18,343
  20,037
  21,802
  23,639
  25,551
  27,538
  29,603
  31,749
  33,979
  36,297
  38,707
  41,214
Cash available for distribution, $m
  10,245
  3,569
  6,545
  10,223
  14,663
  19,914
  26,009
  32,973
  40,815
  49,539
  58,176
  68,632
  79,929
  92,048
  104,967
  118,667
  133,129
  148,340
  164,288
  180,968
  198,379
  216,525
  235,415
  255,064
  275,491
  296,722
  318,785
  341,716
  365,552
  390,336
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
  9,822
  3,267
  5,696
  8,418
  11,366
  14,452
  17,571
  20,609
  23,446
  25,971
  27,627
  29,288
  30,391
  30,902
  30,817
  30,156
  28,967
  27,318
  25,296
  22,996
  20,519
  17,966
  15,429
  12,991
  10,717
  8,657
  6,842
  5,287
  3,990
  2,939
Current shareholders' claim on cash, %
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1
  99.1

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 50.6
Price to Sales 4.9
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 13.1
Price to Free Cash Flow 15.6
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 33.2% 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 36.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9012 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 5.4% 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 5.2%.

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 228.1%.

Life of production assets of 10 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 1.9%. 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 - $23186 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 405 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 $84.8 billion.

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COMPANY NEWS

▶ Activist investor Starboard buys 5.8% stake in Symantec, nominates board members   [Aug-16-18 10:02AM  American City Business Journals]
▶ Broadcom Stock May Fall 8% Amid Anemic Growth   [Aug-09-18 02:00PM  Investopedia]
▶ Here's How CA, Inc. Shares Surged 24% Higher Last Month   [Aug-06-18 01:46PM  Motley Fool]
▶ Chipmaker Qorvo Crushes Quarterly Views, Gets Apple Lift   [Aug-01-18 04:55PM  Investor's Business Daily]
▶ [$$] Why Broadcom Could Jump 66%   [12:08PM  Barrons.com]
▶ 7 Best of the Best Mutual Funds to Buy   [01:26PM  InvestorPlace]
▶ The highest-paid CEOs in the U.S. banking industry   [Jul-21-18 07:29AM  Yahoo Finance]
▶ Photos: Broadcom CEO buys $12.3M estate near Palo Alto tech HQs   [Jul-19-18 08:51AM  American City Business Journals]
▶ Broadcom Gets Another Downgrade From Goldman Sachs   [Jul-18-18 01:21PM  Benzinga]
▶ Broadcom Has Its Work Cut Out for It on the Charts   [Jul-17-18 02:45PM  TheStreet.com]
▶ U.S. lifts ban on suppliers selling to China's ZTE   [Jul-13-18 06:05PM  Reuters]
▶ Company News For Jul 13, 2018   [09:47AM  Zacks]
▶ Broadcom's Plunge Looks a Little Excessive   [Jul-12-18 09:45PM  TheStreet.com]
▶ What Happened in the Stock Market Today   [04:54PM  Motley Fool]
▶ 5 Top Stock Trades for Friday Morning   [04:07PM  InvestorPlace]
▶ Top 4 Broadcom Shareholders   [03:16PM  Investopedia]
▶ Broadcom Stock Is A Knife Worth Catching   [12:06PM  InvestorPlace]
▶ Broadcom stock dives on news of $18.9B plan to buy CA Technologies   [10:18AM  American City Business Journals]
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