Broadcom (NASDAQ:AVGO) stock is up nearly 45% in the last six months, significantly outperforming the broader Nasdaq index, down 1%. This strong performance is largely due to the company’s rising sales, up 40% in the last twelve months. A major driver of this growth is Broadcom’s AI product line, which saw an impressive 220% year-over-year increase in revenue to $12.2 billion in fiscal year 2024, fueled by high demand for its custom AI accelerators (XPUs) and Ethernet products. Broadcom is strategically positioned to capitalize on the generative AI surge with its extensive suite of networking, storage, cybersecurity, and semiconductor offerings.
Considering this strong performance, we believe AVGO stock is a good buy at its current price of around $230. While its current valuation is extremely high, making it sensitive to adverse events, we see minimal cause for concern. Our conclusion is based on comparing AVGO’s current valuation with its recent operating performance and its current and historical financial health. Our analysis across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—shows that Broadcom has a very strong operating performance and financial condition.
That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Also, see – Should You Buy MRK Stock At $80?
How Does AVGO Stock’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, AVGO stock looks very expensive compared to the broader market.
- Broadcom has a price-to-sales (P/S) ratio of 20.2 vs. a figure of 3.0 for the S&P 500
- Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 51.8 compared to 20.5 for S&P 500
- And, it has a price-to-earnings (P/E) ratio of 109.3 vs. the benchmark’s 26.4
How Have AVGO’s Revenues Grown Over Recent Years?
Broadcom’s Revenues have grown considerably over recent years.
- Broadcom has seen its top line grow at an average rate of 24.7% over the last 3 years (vs. increase of 5.5% for S&P 500)
- Its revenues have grown 40.3% from $39 Bil to $55 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
- Also, its quarterly revenues grew 24.7% to $15 Bil in the most recent quarter from $12 Bil a year ago (vs. 4.8% improvement for S&P 500)
How Profitable Is AVGO?
Broadcom’s profit margins are much higher than most companies in the Trefis coverage universe.
Does AVGO Look Financially Stable?
Broadcom’s balance sheet looks strong.
- Broadcom’s Debt figure was $67 Bil at the end of the most recent quarter, while its market capitalization is $1.1 Tril (as of 5/23/2025). This implies a strong Debt-to-Equity Ratio of 6.0% (vs. 19.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $9.3 Bil of the $165 Bil in Total Assets for Broadcom. This yields a moderate Cash-to-Assets Ratio of 5.6% (vs. 13.8% for S&P 500)
How Resilient Is AVGO Stock During A Downturn?
AVGO stock has been less resilient than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- AVGO stock fell 36.7% from a high of $67.43 on 27 December 2021 to $42.71 on 14 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 18 May 2023
- Since then, the stock has increased to a high of $250.00 on 16 December 2024 and currently trades at around $230
Covid Pandemic (2020)
- AVGO stock fell 48.3% from a high of $32.47 on 12 February 2020 to $16.79 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 4 August 2020
Global Financial Crisis (2008)
- AVGO stock fell 21.5% from a high of $1.85 on 28 August 2009 to $1.45 on 3 November 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 4 January 2010
Putting All The Pieces Together: What It Means For AVGO Stock
In summary, Broadcom’s performance across the parameters detailed above are as follows:
- Growth: Extremely Strong
- Profitability: Very Strong
- Financial Stability: Strong
- Downturn Resilience: Very Strong
- Overall: Very Strong
AVGO stock has performed exceptionally well across these parameters. While the stock’s valuation is currently high, it appears justifiable given its massive sales growth and solid operating cash flow margins of around 40%. Therefore, despite its extremely high valuation, the stock remains attractive, supporting our conclusion that AVGO is a good buy.
However, investors should be aware of certain risks. The stock’s high valuation makes it more prone to significant declines during adverse events, as demonstrated by its larger corrections than the broader market in two of the last three market crashes. Additionally, any slowdown in AI spending by companies would directly impact Broadcom’s growth. Overall, investors should carefully consider these potential risks before investing in AVGO.
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