Why NASDAQ:AVGO Is a Promising High-Growth Stock in the Midst of Consolidation.

Groth investors are looking for stocks showing high revenue and EPS growth. We will have a look here to see if BROADCOM INC (NASDAQ:AVGO) is suited for growth investing, while it is forming a base and may be ready to breakout. Investors should of course do their own research, but we spotted BROADCOM INC showing up in our growth with base formation screen, so it may be worth spending some more time on it.

Assessing Growth for NASDAQ:AVGO

ChartMill employs its own Growth Rating system for all stocks. This score, ranging from 0 to 10, is derived by evaluating different growth factors, such as EPS and revenue growth, taking into account both past performance and future projections. NASDAQ:AVGO has earned a 8 for growth:

• The Earnings Per Share has grown by an nice 14.91% over the past year.
• The Earnings Per Share has been growing by 17.90% on average over the past years. This is quite good.
• Looking at the last year, AVGO shows a very strong growth in Revenue. The Revenue has grown by 43.99%.
• AVGO shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 17.94% yearly.
• Based on estimates for the next years, AVGO will show a very strong growth in Earnings Per Share. The EPS will grow by 24.06% on average per year.
• Based on estimates for the next years, AVGO will show a quite strong growth in Revenue. The Revenue will grow by 18.03% on average per year.
• When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

Analyzing Health Metrics

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NASDAQ:AVGO, the assigned 5 reflects its health status:

• AVGO has an Altman-Z score of 7.22. This indicates that AVGO is financially healthy and has little risk of bankruptcy at the moment.
• AVGO has a Altman-Z score of 7.22. This is in the better half of the industry: AVGO outperforms 67.59% of its industry peers.
• AVGO has a debt to FCF ratio of 3.48. This is a good value and a sign of high solvency as AVGO would need 3.48 years to pay back of all of its debts.
• AVGO has a better Debt to FCF ratio (3.48) than 65.74% of its industry peers.

Profitability Assessment of NASDAQ:AVGO

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NASDAQ:AVGO was assigned a score of 8 for profitability:

• With a decent Return On Equity value of 8.71%, AVGO is doing good in the industry, outperforming 62.04% of the companies in the same industry.
• AVGO has a better Return On Invested Capital (7.96%) than 74.07% of its industry peers.
• AVGO had an Average Return On Invested Capital over the past 3 years of 14.76%. This is above the industry average of 11.98%.
• The 3 year average ROIC (14.76%) for AVGO is well above the current ROIC(7.96%). The reason for the recent decline needs to be investigated.
• AVGO has a Profit Margin of 11.43%. This is in the better half of the industry: AVGO outperforms 64.81% of its industry peers.
• Looking at the Operating Margin, with a value of 29.57%, AVGO belongs to the top of the industry, outperforming 91.67% of the companies in the same industry.
• AVGO's Operating Margin has improved in the last couple of years.
• AVGO has a Gross Margin of 63.53%. This is amongst the best in the industry. AVGO outperforms 88.89% of its industry peers.
• AVGO's Gross Margin has improved in the last couple of years.

Looking at the Setup

ChartMill takes into account not only the Technical Rating but also assigns a Setup Rating to each stock. This rating, on a scale of 0 to 10, reflects the degree of consolidation observed based on short-term technical indicators. Currently, NASDAQ:AVGO exhibits a 8 setup rating, indicating its consolidation status in recent days and weeks.

Besides having an excellent technical rating, AVGO also presents a decent setup pattern. We see reduced volatility while prices have been consolidating in the most recent period. There is very little resistance above the current price. There is a support zone below the current price at 224.30, a Stop Loss order could be placed below this zone.

More Strong Growth stocks can be found in our Strong Growth screener.

Our latest full fundamental report of AVGO contains the most current fundamental analsysis.

For an up to date full technical analysis you can check the technical report of AVGO

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.