Broadcom Inc. (NASDAQ:AVGO) Fits the 'Growth at a Reasonable Price' Profile

For investors looking to balance the search for high-growth companies with fiscal care, the "Growth at a Reasonable Price" (GARP) method offers a solid middle path. This method tries to find companies with strong and lasting growth paths, but whose shares are not priced at extreme levels. It avoids the speculative excitement around high-priced tech stocks while also avoiding value traps, companies that are low-priced for a cause. Filtering for stocks with good growth, steady earnings, sound finances, and a fair price can help find options that may provide both upside potential and some protection.

One option found from this filter is Broadcom Inc. (NASDAQ:AVGO), a top worldwide company in creating and providing semiconductor and infrastructure software products. The company's varied collection, covering from data center networking chips to mainframe software, places it within several lasting technology shifts, including AI infrastructure, cloud computing, and enterprise software combination.

A look at Broadcom's basics shows a picture that fits well with the affordable growth idea. The company's full fundamental report on ChartMill gives it a total score of 7 out of 10, with very high marks in growth and earnings, balanced by more average scores in price and financial soundness.

Strong Growth Path

The base of any GARP investment is, expectedly, growth. Broadcom does very well here with a nearly perfect ChartMill Growth Rating of 9. The company is not just suggesting future increase; it is producing notable results now and has a clear path forward.

• Past Results: Over the last year, Broadcom's Earnings Per Share (EPS) rose by 40.47%, while Revenue increased by 23.87%. This is not a single event; the company has shown a steady history with yearly EPS growth of 25.23% and revenue growth of 21.74% over recent years.
• Future Outlook: Experts predict this pace to keep going. Revenue is expected to grow at an average rate of 24.45% each year in the near future, with EPS predicted to rise by 15.36%. This forward-looking strength gives trust that the company's growth narrative stays in place.

For the affordable growth method, this good and predicted growth is necessary. It supplies the basic driver for possible stock price increase, supporting investor focus beyond short-term market movements.

Price Assessment

A high-growth company is only "affordable" if its stock price does not already account for many years of future gains. Broadcom's ChartMill Valuation Rating of 5 shows a varied picture that needs perspective. On the surface, standard measures seem high.

• The stock sells at a Price/Earnings (P/E) ratio of 50.58, which is more than the S&P 500 average.
• Its Price/Forward Earnings ratio is 33.59.

However, price is relative. When measured against its peers in the Semiconductors & Semiconductor Equipment industry, Broadcom's narrative shifts.

• It is priced lower than 61% of its industry based on the P/E ratio.
• Its Price/Free Cash Flow ratio is less expensive than almost 63% of the sector.

Most key for a GARP review, the company's low PEG ratio, which changes the P/E for growth, implies the price is fair when its unusual earnings growth is considered. The higher price can be partly explained by its excellent earnings, which investors often accept paying for.

Basic Earnings and Financial Soundness

Lasting growth must be built on a base of effective operations and a steady balance sheet. This is where Broadcom's high Profitability Rating (9) and average Health Rating (5) matter.

Earnings Strengths: Broadcom works with top-level efficiency.

• It has a notable Profit Margin of 36.20%, doing better than 95% of its industry peers.
• Its Operating Margin (40.94%) and Gross Margin (67.89%) are similarly high-level, placed in the 96th and 91st percentiles, in order.
• Returns on Assets, Equity, and Invested Capital are all solid, showing management is using capital well to produce profits.

Financial Soundness Points: The company's financial soundness gives a balanced view. Its ability to pay debts is strong, with a very good Altman-Z score showing no bankruptcy danger and a sound debt-to-free-cash-flow ratio. The main points of care relate to liquidity measures, where its Current and Quick Ratios are less than many industry peers, and a debt/equity ratio that is above average. The review states, however, that the total amount of debt is workable given the company's strong cash production.

For an affordable growth filter, these points are important. High earnings make sure that growth is worthwhile and can pay for future projects, while a fair financial health score suggests the company is not using too much debt to the point of endangering its growth path.

Summary

Broadcom Inc. presents a solid case for investors using a Growth at a Reasonable Price method. The company shows the needed sign of strong, clear growth in both its recent history and its expected future. While its total price measures are not low, they seem supported and even fair within the setting of its high-growth industry and its unusual, top-level earnings. The company’s financial soundness, while having some parts to watch, is basically steady and supports its continuing work.

This review shows how basic filtering can find companies that balance chance with caution. Broadcom’s picture, strong growth, high earnings, and a price that is acceptable relative to its potential, shows the kind of option this method aims to find.

Interested in reviewing other stocks that match this "Affordable Growth" picture? You can find more possible options by using the set filter on ChartMill.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The information presented is based on data provided and should not be the sole basis for any investment decision. Investing involves risk, including the potential loss of principal. Always conduct your own due diligence and consult with a qualified financial advisor before making any investment decisions.