Comparing Semtech (SMTC) & Broadcom (AVGO)

Semtech (NASDAQ: SMTC) and Broadcom (NASDAQ:AVGO) are both mid-cap technology companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, risk, earnings, profitability, dividends, valuation and analyst recommendations.

Dividends

Broadcom pays an annual dividend of $7.00 per share and has a dividend yield of 2.7%. Semtech does not pay a dividend. Broadcom pays out 178.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk and Volatility

Semtech has a beta of 1.41, indicating that its share price is 41% more volatile than the S&P 500. Comparatively, Broadcom has a beta of 1.04, indicating that its share price is 4% more volatile than the S&P 500.

Profitability

This table compares Semtech and Broadcom’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Semtech 7.79% 12.13% 7.38%
Broadcom 10.18% 28.64% 12.68%

Earnings and Valuation

This table compares Semtech and Broadcom’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Semtech $544.27 million 4.55 $54.66 million $0.68 54.85
Broadcom $17.64 billion 6.12 $1.69 billion $3.93 67.05

Broadcom has higher revenue and earnings than Semtech. Semtech is trading at a lower price-to-earnings ratio than Broadcom, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Semtech and Broadcom, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Semtech 0 2 9 0 2.82
Broadcom 0 1 31 1 3.00

Semtech currently has a consensus target price of $41.90, suggesting a potential upside of 12.33%. Broadcom has a consensus target price of $304.29, suggesting a potential upside of 15.48%. Given Broadcom’s stronger consensus rating and higher possible upside, analysts plainly believe Broadcom is more favorable than Semtech.

Insider and Institutional Ownership

94.0% of Semtech shares are held by institutional investors. Comparatively, 88.5% of Broadcom shares are held by institutional investors. 2.2% of Semtech shares are held by insiders. Comparatively, 3.6% of Broadcom shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

Broadcom beats Semtech on 14 of the 17 factors compared between the two stocks.

About Semtech

Semtech Corporation is a supplier of analog and mixed-signal semiconductor products. The Company designs, develops and markets a range of products for commercial applications, which are sold into the enterprise computing, communications, consumer and industrial end-markets. Its product lines include Signal Integrity, Protection, Wireless and Sensing, and Power and High-Reliability. Applications for the industrial market include video broadcast studio equipment, automated meter reading, wireless charging, military and aerospace, medical, security systems, automotive, Internet of Things, industrial and home automation, and video security and surveillance. Enterprise computing end-markets include desktops, notebooks, servers, graphic boards, printers, datacenter related equipment and passive optical networks. Communications end-market applications include wireless base stations, carrier networks, switches and routers, cable modems, signal conditioners and wireless local area network.

About Broadcom

Broadcom Limited is a designer, developer and global supplier of a range of semiconductor devices with a focus on digital and mixed signal complementary metal oxide semiconductor (CMOS)-based devices and analog III-V based products. The Company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. It offers a range of products that are used in end-products, such as enterprise and data center networking, home connectivity, set-top boxes (STBs), broadband access, telecommunication equipment, smartphones, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Its product portfolio ranges from discrete devices to complex sub-systems that include multiple device types, and also includes firmware for interfacing between analog and digital systems. Its products include mechanical hardware that interfaces with optoelectronic or capacitive sensors.

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