Stock Analysis on Net
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Broadcom Inc. (NASDAQ:AVGO)

Present Value of Free Cash Flow to Equity (FCFE)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Broadcom Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 19.27%
01 FCFE0 24,102
1 FCFE1 23,905 = 24,102 × (1 + -0.82%) 20,042
2 FCFE2 24,826 = 23,905 × (1 + 3.86%) 17,452
3 FCFE3 26,944 = 24,826 × (1 + 8.53%) 15,880
4 FCFE4 30,501 = 26,944 × (1 + 13.20%) 15,072
5 FCFE5 35,953 = 30,501 × (1 + 17.88%) 14,895
5 Terminal value (TV5) 3,035,760 = 35,953 × (1 + 17.88%) ÷ (19.27% – 17.88%) 1,257,711
Intrinsic value of Broadcom Inc. common stock 1,341,052
 
Intrinsic value of Broadcom Inc. common stock (per share) $281.88
Current share price $427.76

Based on: 10-K (reporting date: 2025-11-02).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 5.25%
Expected rate of return on market portfolio2 E(RM) 17.51%
Systematic risk of Broadcom Inc. common stock βAVGO 1.14
 
Required rate of return on Broadcom Inc. common stock3 rAVGO 19.27%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rAVGO = RF + βAVGO [E(RM) – RF]
= 5.25% + 1.14 [17.51% – 5.25%]
= 19.27%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Broadcom Inc., PRAT model

Microsoft Excel
Average Nov 2, 2025 Nov 3, 2024 Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Nov 1, 2020
Selected Financial Data (US$ in millions)
Dividends to common stockholders 11,142 9,814 7,645 6,733 5,913 5,235
Dividends to preferred stockholders — — — 272 299 297
Net income 23,126 5,895 14,082 11,495 6,736 2,960
Net revenue 63,887 51,574 35,819 33,203 27,450 23,888
Total assets 171,092 165,645 72,861 73,249 75,570 75,933
Stockholders’ equity 81,292 67,678 23,988 22,709 24,962 23,874
Financial Ratios
Retention rate1 0.52 -0.66 0.46 0.40 0.08 -0.97
Profit margin2 36.20% 11.43% 39.31% 33.80% 23.45% 11.15%
Asset turnover3 0.37 0.31 0.49 0.45 0.36 0.31
Financial leverage4 2.10 2.45 3.04 3.23 3.03 3.18
Averages
Retention rate -0.03
Profit margin 25.89%
Asset turnover 0.38
Financial leverage 2.84
 
FCFE growth rate (g)5 -0.82%

Based on: 10-K (reporting date: 2025-11-02), 10-K (reporting date: 2024-11-03), 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-11-01).

2025 Calculations

1 Retention rate = (Net income – Dividends to common stockholders – Dividends to preferred stockholders) ÷ (Net income – Dividends to preferred stockholders)
= (23,126 – 11,142 – 0) ÷ (23,126 – 0)
= 0.52

2 Profit margin = 100 × (Net income – Dividends to preferred stockholders) ÷ Net revenue
= 100 × (23,126 – 0) ÷ 63,887
= 36.20%

3 Asset turnover = Net revenue ÷ Total assets
= 63,887 ÷ 171,092
= 0.37

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 171,092 ÷ 81,292
= 2.10

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -0.03 × 25.89% × 0.38 × 2.84
= -0.82%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (2,035,103 × 19.27% – 24,102) ÷ (2,035,103 + 24,102)
= 17.88%

where:
Equity market value0 = current market value of Broadcom Inc. common stock (US$ in millions)
FCFE0 = the last year Broadcom Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Broadcom Inc. common stock

FCFE growth rate (g) forecast

Broadcom Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -0.82%
2 g2 3.86%
3 g3 8.53%
4 g4 13.20%
5 and thereafter g5 17.88%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -0.82% + (17.88% – -0.82%) × (2 – 1) ÷ (5 – 1)
= 3.86%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -0.82% + (17.88% – -0.82%) × (3 – 1) ÷ (5 – 1)
= 8.53%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -0.82% + (17.88% – -0.82%) × (4 – 1) ÷ (5 – 1)
= 13.20%