Broadcom currently trades at $294.40 and has been a dream stock for shareholders. It’s returned 767% since August 2020, blowing past the S&P 500’s 84.8% gain. The company has also beaten the index over the past six months as its stock price is up 38.3%.
Following the strength, is AVGO a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Is AVGO a Good Business?
Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ:AVGO) is a semiconductor conglomerate spanning wireless communications, networking, and data storage as well as infrastructure software focused on mainframes and cybersecurity.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Broadcom grew its sales at an incredible 20% compounded annual growth rate. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
2. Elite Gross Margin Powers Best-In-Class Business Model
In the semiconductor industry, a company’s gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.
Broadcom’s gross margin is one of the best in the semiconductor sector, and its differentiated products give it strong pricing power. As you can see below, it averaged an elite 75.8% gross margin over the last two years. Said differently, roughly $75.84 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue. 
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Broadcom has shown terrific cash profitability, and if sustainable, puts it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the semiconductor sector, averaging an eye-popping 41.3% over the last two years.
Final Judgment
These are just a few reasons why we think Broadcom is an elite semiconductor company, and with its shares outperforming the market lately, the stock trades at 40.6× forward P/E (or $294.40 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
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