Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Broadcom Inc. (NASDAQ:AVGO)

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Present Value of Free Cash Flow to Equity (FCFE)

Intermediate level

Intrinsic Stock Value (Valuation Summary)

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

US$ in millions, except per share data

Microsoft Excel LibreOffice Calc
Year Value FCFEt or Terminal value (TVt) Calculation Present value at
01 FCFE0
1 FCFE1 = × (1 + )
2 FCFE2 = × (1 + )
3 FCFE3 = × (1 + )
4 FCFE4 = × (1 + )
5 FCFE5 = × (1 + )
5 Terminal value (TV5) = × (1 + ) ÷ ()
Intrinsic value of Broadcom Inc.’s common stock
 
Intrinsic value of Broadcom Inc.’s common stock (per share)
Current share price

Based on: 10-K (filing date: 2019-12-20).

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 LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk of Broadcom Inc.’s common stock βAVGO
 
Required rate of return on Broadcom Inc.’s common stock3 rAVGO

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]
= + []
=


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Broadcom Inc., PRAT model

Microsoft Excel LibreOffice Calc
Average Nov 3, 2019 Nov 4, 2018 Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014
Selected Financial Data (US$ in millions)
Dividends to common stockholders
Dividends to preferred stockholders
Net income (loss) attributable to Broadcom Inc. stockholders
Net revenue
Total assets
Total Broadcom Inc. stockholders’ equity
Financial Ratios
Retention rate1
Profit margin2
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin
Asset turnover
Financial leverage
 
FCFE growth rate (g)5

Based on: 10-K (filing date: 2019-12-20), 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29).

2019 Calculations

1 Retention rate = (Net income (loss) attributable to Broadcom Inc. stockholders – Dividends to common stockholders – Dividends to preferred stockholders) ÷ (Net income (loss) attributable to Broadcom Inc. stockholders – Dividends to preferred stockholders)
= () ÷ () =

2 Profit margin = 100 × (Net income (loss) attributable to Broadcom Inc. stockholders – Dividends to preferred stockholders) ÷ Net revenue
= 100 × () ÷ =

3 Asset turnover = Net revenue ÷ Total assets
= ÷ =

4 Financial leverage = Total assets ÷ Total Broadcom Inc. stockholders’ equity
= ÷ =

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × × =


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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × ( × ) ÷ ( + ) =

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


FCFE growth rate (g) forecast

Broadcom Inc., H-model

Microsoft Excel LibreOffice Calc
Year Value gt
1 g1
2 g2
3 g3
4 g4
5 and thereafter g5

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

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= + () × (2 – 1) ÷ (5 – 1) =

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= + () × (3 – 1) ÷ (5 – 1) =

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= + () × (4 – 1) ÷ (5 – 1) =