Broadcom Inc. (NASDAQ:AVGO)

The valuation ratios exhibit a three-phase trajectory characterized by an initial contraction, a period of extreme expansion, and a subsequent phase of stabilization at elevated levels. Between early 2021 and mid-2022, most valuation multiples experienced a decline, reaching a cyclical trough in July 2022. This was followed by a significant escalation in multiples starting in late 2023, peaking in late 2024 and mid-2025, before settling into a higher baseline through early 2026.

Price to Earnings (P/E) Ratio

The P/E ratio demonstrated extreme volatility, starting at 50.39 in January 2021 and declining to a low of 20.70 by October 2022. A rapid expansion occurred between October 2023 and November 2024, with the ratio peaking at 175.56. Following this peak, a correction ensued, with the ratio stabilizing between 63.64 and 92.18 throughout 2025 and early 2026.

Price to Operating Profit (P/OP) Ratio

The P/OP ratio mirrored the trajectory of the P/E ratio but with less variance. It decreased from 35.86 in January 2021 to a minimum of 16.17 in July 2022. The ratio subsequently climbed to a peak of 76.87 in November 2024. In the final periods observed, the ratio fluctuated between 51.77 and 77.21, ending at 56.98 in May 2026.

Price to Sales (P/S) Ratio

A steady upward trend in the P/S ratio is observable over the long term. After remaining relatively stable between 6.54 and 9.55 from 2021 to early 2023, the ratio accelerated sharply, reaching 14.46 in October 2023. The multiple peaked at 29.12 in August 2025, indicating a significant increase in the market's valuation of each unit of revenue, before ending at 24.72 in May 2026.

Price to Book Value (P/BV) Ratio

The P/BV ratio increased from 7.68 in January 2021 to 21.59 by October 2023. A sharp, isolated contraction to 8.32 occurred on October 29, 2023, followed by a consistent recovery and further expansion. The ratio reached a maximum of 23.82 in August 2025 and concluded the period at 21.28 in May 2026, reflecting a sustained premium over the book value of equity.

Overall, the convergence of these trends suggests a fundamental shift in valuation sentiment. The transition from low multiples in 2022 to significantly higher multiples in 2025 and 2026 indicates a market re-rating, where the asset is priced at a much higher premium relative to its earnings, sales, and book value than in the previous cycle.

The valuation trajectory exhibits three distinct phases: initial compression, aggressive expansion, and subsequent stabilization. Over the analyzed period, the price-to-earnings (P/E) ratio transitioned from a high of 50.39 in early 2021 to a cyclical low of 20.70 by October 2022, before experiencing a rapid escalation that peaked at 175.56 in November 2024.

Share Price Trends

A consistent long-term appreciation is observed, with the share price rising from 45.12 US$ in January 2021 to 392.16 US$ by May 2026. Significant acceleration occurred between October 2023 and August 2025, during which the price experienced several substantial quarterly leaps.

Earnings Per Share (EPS) Performance

Earnings demonstrated a general upward trend, growing from 0.90 US$ to 6.16 US$. However, a notable period of volatility occurred between February 2024 and August 2024, where EPS dropped from 2.51 US$ to a low of 1.09 US$ before recovering steadily through 2025 and 2026.

P/E Ratio Dynamics

The P/E ratio reflects a decoupling of price and earnings growth during the mid-cycle. From January 2021 to October 2022, the ratio contracted as earnings growth outpaced price increases. Conversely, from January 2023 to November 2024, the ratio expanded exponentially, reaching its peak of 175.56. This suggests a period where market valuation grew significantly faster than realized earnings.

Valuation Correction and Stabilization

Following the November 2024 peak, a corrective phase is evident. The P/E ratio declined from 175.56 to 63.64 by May 2026. This downward adjustment in the multiple is attributed to a combination of price stabilization and a strong recovery in EPS, which rose from 1.26 US$ in August 2024 to 6.16 US$ by the end of the period, effectively bringing the valuation back toward a more moderate range.

The valuation trajectory of the common stock exhibits a significant expansion in the Price to Operating Profit (P/OP) multiple over the analyzed period, characterized by an initial phase of compression followed by a substantial escalation.

Initial Valuation Compression (January 2021 – July 2022)

A consistent downward trend in the P/OP ratio is observed during the first two years, falling from a high of 35.86 to a period low of 16.17. This contraction occurred as operating profit per share grew steadily from 1.26 to 3.17, effectively outpacing the growth of the share price and resulting in a more conservative valuation multiple.

Valuation Recovery and Aggressive Expansion (October 2022 – November 2024)

The P/OP ratio entered a phase of rapid growth starting in late 2022. After stabilizing near 16.33, the ratio climbed to 31.96 by October 2023 and surged to a peak of 76.87 by November 2024. This period represents a significant shift in market sentiment, where the share price increased at a rate far exceeding the growth in operating profitability.

High-Level Volatility and Stabilization (February 2025 – May 2026)

The final period is marked by heightened volatility at elevated levels. The P/OP ratio reached a secondary peak of 77.21 in August 2025 before moderating to 56.98 by May 2026. Despite these fluctuations, the multiple remains substantially higher than the levels observed between 2021 and 2023.

Analysis of the underlying components reveals a decoupling between share price and operating profit per share. While operating profit per share increased approximately 5.4 times from January 2021 to May 2026, the share price increased approximately 8.7 times. This divergence is the primary driver behind the overall rise in the P/OP ratio, indicating that the market began assigning a much higher premium to each dollar of operating profit in the latter half of the period.

The Price-to-Sales (P/S) ratio exhibits a significant long-term upward trajectory, indicating a substantial expansion in market valuation relative to revenue generation. While sales per share grew consistently over the analyzed period, the share price appreciated at a disproportionately faster rate, resulting in a marked increase in the valuation multiple.

Initial Valuation Phase (2021–2022)

Between January 2021 and January 2022, the P/S ratio remained relatively stable, fluctuating within a range of 7.46 to 9.55. During this period, the growth in share price was largely commensurate with the incremental rise in sales per share, suggesting a steady valuation environment.

Valuation Acceleration (2023–2024)

A pivot in the valuation trend occurred starting in April 2023, as the P/S ratio climbed from 9.33 to 18.34 by February 2024. This acceleration was driven by a rapid increase in share price that significantly outpaced the growth rate of sales per share, reflecting a shift in investor sentiment or higher future growth expectations.

Peak Expansion and Consolidation (2024–2026)

The P/S ratio reached a peak of 29.12 in August 2025, coinciding with a share price of 369.57. Following this peak, the ratio experienced some volatility but remained at historically elevated levels, concluding at 24.72 in May 2026. This represents a more than threefold increase compared to the baseline established in early 2021.

Revenue vs. Price Divergence

Sales per share grew from 6.05 to 15.86, a steady increase of approximately 162%. In contrast, the share price rose from 45.12 to 392.16, an increase of approximately 771%. The widening gap between these two metrics is the primary driver for the expansion of the P/S ratio, indicating that the market is attributing significantly more value to each dollar of sales than in previous years.

The valuation of the common stock exhibits a significant long-term expansion in the Price to Book Value (P/BV) ratio, characterized by two distinct growth phases separated by a sharp fundamental adjustment in early 2024.

Initial Valuation Trend (2021–2023)

From January 2021 to January 2023, the P/BV ratio increased steadily from 7.68 to 11.31. This growth was primarily driven by an appreciating share price while the book value per share remained relatively stagnant, fluctuating within a narrow range between 5.15 and 6.05. This trend culminated in a peak ratio of 21.59 in October 2023, indicating a period where market valuation grew substantially faster than the underlying accounting value of the assets.

Fundamental Reset (February 2024)

A significant shift occurred on February 4, 2024, where the P/BV ratio dropped abruptly from 21.59 to 8.32. This contraction was not caused by a decline in share price—which actually continued to rise—but by a sharp increase in the book value per share, which jumped from 5.12 to 15.17. This suggests a substantial increase in equity or a revaluation of assets that fundamentally lowered the valuation multiple.

Secondary Expansion Phase (2024–2026)

Following the reset, the P/BV ratio entered a second aggressive growth trajectory. Between May 2024 and August 2025, the ratio climbed from 11.17 to a peak of 23.82. This period is marked by rapid share price appreciation that outpaced the modest growth in book value per share. The ratio remained elevated through early 2026, concluding at 21.28 in May 2026.

Comparative Book Value Analysis

The book value per share remained low and stable for the first three years of the period (averaging approximately 5.50) before establishing a new, higher baseline starting in February 2024. From that point forward, the book value showed a consistent upward trend, reaching 18.43 by May 2026. Despite this increase in tangible value, the market consistently applied a higher premium to the stock, as evidenced by the P/BV ratio remaining significantly above the 2021–2023 levels.

Overall, the data indicates a market perception of increasing value far exceeding the accounting book value. The volatility in the P/BV ratio is attributed both to aggressive share price growth and a one-time structural increase in the company's book value in early 2024.