Is Broadcom Inc. (NASDAQ:AVGO) Potentially Undervalued?

Let's talk about the popular Broadcom Inc. (NASDAQ:AVGO). The company's shares saw a decent share price growth of 19% on the NASDAQGS over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Broadcom’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Broadcom

Is Broadcom Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 5.0% below our intrinsic value, which means if you buy Broadcom today, you’d be paying a fair price for it. And if you believe that the stock is really worth $166.63, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Broadcom’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Broadcom look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Broadcom. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? AVGO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on AVGO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Broadcom as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 4 warning signs for Broadcom and we think they deserve your attention.

If you are no longer interested in Broadcom, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.