Stock Analysis on Net

Broadcom Inc. (NASDAQ:AVGO)

Economic Value Added (EVA)

Microsoft Excel

Economic Profit

Broadcom Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Nov 1, 2020 Nov 3, 2019 Nov 4, 2018
Net operating profit after taxes (NOPAT)1 14,440 12,892 7,124 3,161 3,003 4,475
Cost of capital2 13.53% 12.81% 12.45% 11.78% 11.68% 12.50%
Invested capital3 62,670 62,111 64,649 65,921 60,032 44,617
 
Economic profit4 5,963 4,934 (926) (4,602) (4,009) (1,103)

Based on: 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), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 14,44013.53% × 62,670 = 5,963

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Broadcom Inc. economic profit increased from 2021 to 2022 and from 2022 to 2023.

Net Operating Profit after Taxes (NOPAT)

Broadcom Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Nov 1, 2020 Nov 3, 2019 Nov 4, 2018
Net income attributable to Broadcom Inc. stockholders 14,082 11,495 6,736 2,960 2,724 12,259
Deferred income tax expense (benefit)1 (501) (45) (997) (1,082) (787) (8,548)
Increase (decrease) in allowances for doubtful accounts2
Increase (decrease) in restructuring liabilities3 (4) 2 (30) (74) 86 (23)
Increase (decrease) in equity equivalents4 (505) (43) (1,027) (1,156) (701) (8,571)
Interest expense 1,622 1,737 1,885 1,777 1,444 628
Interest expense, operating lease liability5 16 17 21 24 24 17
Adjusted interest expense 1,638 1,754 1,906 1,801 1,468 645
Tax benefit of interest expense6 (344) (368) (400) (378) (308) (136)
Adjusted interest expense, after taxes7 1,294 1,385 1,505 1,423 1,160 510
(Gain) loss on marketable securities (11) 169 (99) (31) (145) (3)
Interest income (535) (100) (16) (53) (98) (114)
Investment income, before taxes (546) 69 (115) (84) (243) (117)
Tax expense (benefit) of investment income8 115 (14) 24 18 51 25
Investment income, after taxes9 (431) 55 (91) (66) (192) (92)
(Income) loss from discontinued operations, net of tax10 1 12 19
Net income (loss) attributable to noncontrolling interest 351
Net operating profit after taxes (NOPAT) 14,440 12,892 7,124 3,161 3,003 4,475

Based on: 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), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances for doubtful accounts.

3 Addition of increase (decrease) in restructuring liabilities.

4 Addition of increase (decrease) in equity equivalents to net income attributable to Broadcom Inc. stockholders.

5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 419 × 3.90% = 16

6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,638 × 21.00% = 344

7 Addition of after taxes interest expense to net income attributable to Broadcom Inc. stockholders.

8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 546 × 21.00% = 115

9 Elimination of after taxes investment income.

10 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Broadcom Inc. NOPAT increased from 2021 to 2022 and from 2022 to 2023.

Cash Operating Taxes

Broadcom Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Nov 1, 2020 Nov 3, 2019 Nov 4, 2018
Provision for (benefit from) income taxes 1,015 939 29 (518) (510) (8,084)
Less: Deferred income tax expense (benefit) (501) (45) (997) (1,082) (787) (8,548)
Add: Tax savings from interest expense 344 368 400 378 308 136
Less: Tax imposed on investment income 115 (14) 24 18 51 25
Cash operating taxes 1,745 1,367 1,402 925 534 575

Based on: 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), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Broadcom Inc. cash operating taxes decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Invested Capital

Broadcom Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Nov 1, 2020 Nov 3, 2019 Nov 4, 2018
Current portion of long-term debt 1,608 440 290 827 2,787
Long-term debt, excluding current portion 37,621 39,075 39,440 40,235 30,011 17,493
Operating lease liability1 419 463 543 627 649 512
Total reported debt & leases 39,648 39,978 40,273 41,689 33,447 18,005
Stockholders’ equity 23,988 22,709 24,962 23,874 24,941 26,657
Net deferred tax (assets) liabilities2 (698) (573) (668) 329 1,481 (115)
Allowances for doubtful accounts3
Restructuring liabilities4 2 6 4 34 108 22
Equity equivalents5 (696) (567) (664) 363 1,589 (93)
Accumulated other comprehensive (income) loss, net of tax6 (207) 54 116 108 140 115
Adjusted stockholders’ equity 23,085 22,196 24,414 24,345 26,670 26,679
Construction in progress7 (63) (63) (38) (113) (85) (67)
Invested capital 62,670 62,111 64,649 65,921 60,032 44,617

Based on: 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), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of restructuring liabilities.

5 Addition of equity equivalents to stockholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Broadcom Inc. invested capital decreased from 2021 to 2022 but then slightly increased from 2022 to 2023.

Cost of Capital

Broadcom Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 517,993 517,993 ÷ 551,593 = 0.94 0.94 × 14.19% = 13.33%
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value ÷ 551,593 = 0.00 0.00 × 0.00% = 0.00%
Debt3 33,181 33,181 ÷ 551,593 = 0.06 0.06 × 4.11% × (1 – 21.00%) = 0.20%
Operating lease liability4 419 419 ÷ 551,593 = 0.00 0.00 × 3.90% × (1 – 21.00%) = 0.00%
Total: 551,593 1.00 13.53%

Based on: 10-K (reporting date: 2023-10-29).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 232,307 232,307 ÷ 265,784 = 0.87 0.87 × 14.19% = 12.41%
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value ÷ 265,784 = 0.00 0.00 × 0.00% = 0.00%
Debt3 33,014 33,014 ÷ 265,784 = 0.12 0.12 × 4.10% × (1 – 21.00%) = 0.40%
Operating lease liability4 463 463 ÷ 265,784 = 0.00 0.00 × 3.60% × (1 – 21.00%) = 0.00%
Total: 265,784 1.00 12.81%

Based on: 10-K (reporting date: 2022-10-30).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 262,158 262,158 ÷ 312,802 = 0.84 0.84 × 14.19% = 11.90%
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value 6,709 6,709 ÷ 312,802 = 0.02 0.02 × 4.77% = 0.10%
Debt3 43,392 43,392 ÷ 312,802 = 0.14 0.14 × 4.09% × (1 – 21.00%) = 0.45%
Operating lease liability4 543 543 ÷ 312,802 = 0.00 0.00 × 3.78% × (1 – 21.00%) = 0.01%
Total: 312,802 1.00 12.45%

Based on: 10-K (reporting date: 2021-10-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 176,741 176,741 ÷ 227,402 = 0.78 0.78 × 14.19% = 11.03%
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value 4,760 4,760 ÷ 227,402 = 0.02 0.02 × 6.72% = 0.14%
Debt3 45,274 45,274 ÷ 227,402 = 0.20 0.20 × 3.79% × (1 – 21.00%) = 0.60%
Operating lease liability4 627 627 ÷ 227,402 = 0.00 0.00 × 3.80% × (1 – 21.00%) = 0.01%
Total: 227,402 1.00 11.78%

Based on: 10-K (reporting date: 2020-11-01).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 126,896 126,896 ÷ 165,529 = 0.77 0.77 × 14.19% = 10.88%
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value 4,332 4,332 ÷ 165,529 = 0.03 0.03 × 7.39% = 0.19%
Debt3 33,652 33,652 ÷ 165,529 = 0.20 0.20 × 3.70% × (1 – 21.00%) = 0.59%
Operating lease liability4 649 649 ÷ 165,529 = 0.00 0.00 × 3.70% × (1 – 21.00%) = 0.01%
Total: 165,529 1.00 11.68%

Based on: 10-K (reporting date: 2019-11-03).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 99,745 99,745 ÷ 116,884 = 0.85 0.85 × 14.19% = 12.11%
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value ÷ 116,884 = 0.00 0.00 × 0.00% = 0.00%
Debt3 16,627 16,627 ÷ 116,884 = 0.14 0.14 × 3.38% × (1 – 21.00%) = 0.38%
Operating lease liability4 512 512 ÷ 116,884 = 0.00 0.00 × 3.38% × (1 – 21.00%) = 0.01%
Total: 116,884 1.00 12.50%

Based on: 10-K (reporting date: 2018-11-04).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Broadcom Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Nov 1, 2020 Nov 3, 2019 Nov 4, 2018
Selected Financial Data (US$ in millions)
Economic profit1 5,963 4,934 (926) (4,602) (4,009) (1,103)
Invested capital2 62,670 62,111 64,649 65,921 60,032 44,617
Performance Ratio
Economic spread ratio3 9.51% 7.94% -1.43% -6.98% -6.68% -2.47%
Benchmarks
Economic Spread Ratio, Competitors4
Advanced Micro Devices Inc. -19.61% -19.33% 37.40% 11.14% -6.98%
Analog Devices Inc. -7.00% -8.36% -11.63% -6.69% -5.15% -7.93%
Applied Materials Inc. 18.71% 28.58% 24.10% 12.29% 11.92% 20.00%
Intel Corp. -13.34% -6.91% 10.28% 15.95% 14.03%
KLA Corp. 25.00% 27.25% 15.91% 4.76% 6.26% 24.42%
Lam Research Corp. 11.24% 25.85% 25.31% 8.33% 4.88% 10.04%
Micron Technology Inc. -25.70% 2.13% -2.40% -8.00% 2.19% 24.79%
NVIDIA Corp. -9.34% 32.86% 13.29% -0.71% 59.89%
ON Semiconductor Corp. 0.00% 1.89% -2.44% -13.73% -10.22%
Qualcomm Inc. 3.54% 29.98% 27.39% 12.43% 13.82% -30.84%
Texas Instruments Inc. 15.64% 36.30% 34.92% 30.07% 29.75%

Based on: 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), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04).

1 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 5,963 ÷ 62,670 = 9.51%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Broadcom Inc. economic spread ratio improved from 2021 to 2022 and from 2022 to 2023.

Economic Profit Margin

Broadcom Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Nov 1, 2020 Nov 3, 2019 Nov 4, 2018
Selected Financial Data (US$ in millions)
Economic profit1 5,963 4,934 (926) (4,602) (4,009) (1,103)
Net revenue 35,819 33,203 27,450 23,888 22,597 20,848
Performance Ratio
Economic profit margin2 16.65% 14.86% -3.37% -19.26% -17.74% -5.29%
Benchmarks
Economic Profit Margin, Competitors3
Advanced Micro Devices Inc. -50.06% -47.93% 14.10% 4.98% -3.53%
Analog Devices Inc. -25.15% -31.34% -74.75% -21.73% -15.77% -23.81%
Applied Materials Inc. 12.54% 16.50% 15.38% 9.35% 8.26% 11.81%
Intel Corp. -22.66% -9.72% 11.51% 16.78% 15.71%
KLA Corp. 19.86% 23.04% 15.68% 5.33% 8.74% 15.83%
Lam Research Corp. 9.79% 18.76% 18.07% 8.16% 4.26% 8.73%
Micron Technology Inc. -88.42% 3.66% -4.01% -15.77% 3.62% 28.88%
NVIDIA Corp. -7.39% 22.03% 10.39% -0.92% 24.45%
ON Semiconductor Corp. -0.01% 2.12% -2.74% -18.00% -12.70%
Qualcomm Inc. 3.11% 19.97% 16.50% 9.38% 12.21% -25.52%
Texas Instruments Inc. 20.16% 31.83% 31.23% 26.95% 24.93%

Based on: 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), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04).

1 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × 5,963 ÷ 35,819 = 16.65%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Broadcom Inc. economic profit margin improved from 2021 to 2022 and from 2022 to 2023.