The calculations below outline how an intrinsic value for Broadcom is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.
See our documentation to learn about this calculation.
|Levered FCF (USD, Millions)||$4,934.34||$7,153.42||$8,319.60||$9,733.93||$11,291.36|
|Source||Analyst x10||Analyst x10||Analyst x4||Extrapolated @ (17%, capped from 66.9%)||Extrapolated @ (16%, capped from 66.9%)|
Discounted (@ 8.9%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $11,291 × (1 + 2.3%) ÷ (8.93% – 2.3%)
Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding ($145,369 / 405)
Value per share:
Current discount (share price of $254.3): 29%
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 8.93% = 2.33% + (0.861 * 7.67%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.861 = 0.788 (1 + (1- 30%) (13.19%))
Levered Beta used in calculation = 0.861
Are Broadcom's annual earnings growth expected to exceed 3.4% over the next 3 years?
Mr. Hock E. Tan has been the Chief Executive Officer, President and Executive Director of Broadcom Limited since March 2006. Mr. Tan has been Chief Executive Officer and President at Avago Technologies Finance Pte. Ltd. since March 2006. Mr. Tan has been the Chief Executive Officer at Broadcom Corporation since February 1, 2016. He is a semiconductor industry veteran with more than 25 years of extensive global operations and management experience. He served as the Chief Executive Officer and President of Emulex Corporation since May 5, 2015. Mr. Tan served as the Chief Executive Officer and President of PLX Technology Inc. since August 12, 2014. He serves as the President of Micro Networks Corporation. He served as the President, Chairman of the Board and Chief Executive Officer of Integrated Device Technology, Inc. from September 16, 2005 to January 23, 2008. He served as the Chief Executive Officer and President after the recapitalization of Integrated Circuit Systems, Inc. from May 11, 1999 to September 2005. He joined Integrated Circuit Systems, Inc. in August 1994 and served as its Senior Vice President and Chief Financial Officer since February 1995. Since April 1996, he served as the Chief Operating Officer of Integrated Circuit Systems, Inc. He served as Vice President of Finance of Commodore International, Ltd. from 1992 to 1994. He served as the Managing Director of Pacven Investment, Ltd. from 1988 to 1992 and was its founder. He served as the Managing Director of Hume Industries (M) Ltd. from 1983 to 1988. He held senior financial positions with PepsiCo, Inc. and General Motors Corporation. He served as the Chairman of Integrated Circuit Systems, Inc. from September 16, 2005 to January 23, 2008. He has been a Director of Integrated Circuit Systems Inc., since May 1999 and Broadcom Corporation since February 1, 2016. He serves as a Director of Avago Technologies U.S. Inc. He has been a Member of the Board of Directors of Avago Technologies Finance Pte. Ltd. since March 2006. He holds an MBA from Harvard Business School and an MS and BS in Mechanical Engineering from Massachusetts Institute of Technology.
Average tenure of the Broadcom management team:
Average tenure of the Broadcom board of directors:
Broadcom Limited designs, develops, and supplies a range of semiconductor devices worldwide. It focuses on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. The Wired Infrastructure segment provides set-top box system-on-chips (SoCs); cable, digital subscriber line, and passive optical networking central office/consumer premise equipment SoCs; Ethernet switching and routing application specific standard products; embedded processors and controllers; serializer/deserializer application specific integrated circuits; optical and copper physical layers; and fiber optic laser and receiver components. The Wireless Communications segment offers RF front end modules, filters, and power amplifiers; Wi-Fi, Bluetooth, and global positioning system/global navigation satellite system SoCs; and custom touch controllers. The Enterprise Storage segment provides serial attached small computer system interface, and redundant array of independent disks controllers and adapters; peripheral component interconnect express switches; fiber channel host bus adapters; read channel based SoCs; and preamplifiers. The Industrial & Other segment optocouplers; industrial fiber optics motion control encoders and subsystems; and light emitting diodes. Its products are used in various applications, including enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. The company was formerly known as Avago Technologies Limited and changed its name to Broadcom Limited in February 2016. Broadcom Limited was founded in 2005 and is headquartered in Singapore.
|Market Cap:||$102,880 million|
1 Yishun Avenue 7, Singapore, 768923, Singapore
|Sector:||Semiconductors and Semiconductor Equipment|