Broadcom stock (NASDAQ:AVGO) experienced a 7% decline on Thursday, February 27th, as part of a broader selloff affecting chip stocks. This market reaction followed the release of Nvidia’s earnings report and President Trump’s announcement of increased tariffs on China, as well as the imposition of tariffs on imports from Canada and Mexico, set to take effect next week.
After its recent fall, AVGO stock looks attractive but volatile – making it a tricky pick to buy at its current price of around $200. We believe there is minimal cause for concern with AVGO stock, which makes it attractive but highly sensitive to adverse events as its current valuation is extremely high.
We arrive at our conclusion by comparing the current valuation of AVGO stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Broadcom along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below.
How does Broadcom’s valuation look vs. the S&P 500?
Going by what you pay per dollar of sales or profit, AVGO stock looks very expensive compared to the broader market.
• Broadcom has a price-to-sales (P/S) ratio of 20.1 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 69.0 compared to 24.4 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 51.9 vs. the benchmark’s 24.4
How have Broadcom’s revenues grown over recent years?
Broadcom’s Revenues have grown considerably over recent years.
• Broadcom has seen its top line grow at an average rate of 24.3% over the last 3 years (vs. 9.8% for S&P 500)
• Its revenues have grown 44.0% from $36 Bil to $52 Bil in the last 12 months (vs. change of 5.6% for S&P 500)
• Also, its quarterly revenues grew 51.2% to $14 Bil in the most recent quarter from $9.3 Bil a year ago (vs. 7.2% change for S&P 500)
How profitable is Broadcom?
Broadcom’s profit margins are much higher than most companies in the Trefis coverage universe.
• Broadcom’s Operating Income over the last four quarters was $15 Bil, which represents a high Operating Margin of 29.1% (vs. 12.6% for S&P 500)
• Broadcom’s Operating Cash Flow (OCF) over this period was $20 Bil, pointing to a high OCF-to-Sales Ratio of 38.7% (vs. 14.4% for S&P 500)
Does Broadcom look financially stable?
Broadcom’s balance sheet looks strong.
• Broadcom’s Debt figure was $68 Bil at the end of the most recent quarter, while its market capitalization is $925 Bil (as of 2/27/2025). This implies a strong Debt-to-Equity Ratio of 6.5% (vs. 19.7% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $9 billion of the $166 billion in Total Assets for Broadcom. This yields a moderate Cash-to-Assets Ratio of 5.6% (vs. 14.1% for S&P 500)
How resilient is AVGO stock during a downturn?
AVGO stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• AVGO stock fell 34.8% from a high of $62.71 on 4 January 2022 to $40.86 on 16 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 17 May 2023
• Since then, the stock has increased to a high of $249.33 on 16 December 2024 and currently trades at around $200
Covid Pandemic (2020)
• AVGO stock fell 46.8% from a high of $27.40 on 19 February 2020 to $14.57 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 5 June 2020
Putting all the pieces together: What it means for AVGO stock
In summary, Broadcom’s performance across the parameters detailed above are as follows:
• Growth: Extremely Strong
• Profitability: Very Strong
• Financial Stability: Strong
• Downturn Resilience: Strong
• Overall: Very Strong
Hence, despite its extremely high valuation, the stock appears attractive but volatile, which supports our conclusion that AVGO is a tricky stock to buy.
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