Broadcom (AVGO): fair value

Fair-value band

The normal range for this name runs from $419 (cheap) to $699 (expensive); it is now priced at $336.

That is 2.4σ below this name's own normal premium.

Is Broadcom undervalued?

Cheap, relative to its own history. Broadcom trades at $336, 14% above the fair value this model estimates, but it has habitually traded 90% above fair value, and today's gap is 2.4σ below that norm, wider than the range it normally trades in, so the verdict is Cheap: priced further below its own norm than usual, not just below the model's fair value.

Diligence checklist

6 pass · 2 fail · 3 no data

• PASSCash actually collected from profit, last 12 months: 148%XBRL · Broadcom gets $1.48 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• PASSGap between paper profit and real cash: -1.4%XBRL · Broadcom's "profit on paper" and "cash in the bank" gap is small enough to pass.
• PASSDebt compared to one year of cash earnings: 0.86xXBRL · Broadcom could pay off everything it owes, net of the cash it holds, with 0.86 of a single year's earnings. My limit for a name I would buy is three years, so debt is not a risk here.
• PASSHow much more it earns on capital than that capital costs: +8.01ppXBRL · Broadcom earns 8.0 points more on the capital it employs than that capital costs. The gap is real but not wide, so growth here creates value at a modest rate rather than compounding it. The gap is wider than it was at the start of the window.
• FAILStock sold by executives and directors on the open market, last 6 months: $33.7MEDGAR (dealbreaker) · Brazeal Mark David sold $32.4M of stock in the last 6 months, outside any pre-planned selling schedule, and $33.7M went out that way in total. My rulebook says more than $5 million of this kind of selling is disqualifying for a "long" position (buying the stock). The full list of open-market sellers: Brazeal Mark David $32.4M, Delly Gayla J $0.7M, Page Justine $0.6M. A further $500.0M went out under pre-planned 10b5-1 schedules, which I don't count: those sales are set up months ahead and say nothing about what management thinks today. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either. filing ↗
• N/AHow long the CEO has run this company: n/aTEXT · I couldn't establish when Broadcom's current chief executive took the job: no appointment appears in the 8-K item 5.02 history.
• N/AProfit margin held up during the last sales slump: n/aXBRL · There's no revenue downturn in Broadcom's filed record, or gross profit isn't tagged, so this test has nothing to measure. It needs a bad patch to look at: without one, whether customers would stay through a price rise is untested rather than proven.
• PASSNormal profit margin across a full business cycle: FCF margin 44.2% vs 51.0% medianXBRL · Broadcom's current cash margin (44.2%) sits a little below its long-run average (51.0%). My valuation grows the average, so a soft patch doesn't get written into the value as if it were permanent. Across the window the margin ran between 42.1% in November 2025 and 55.0% in October 2021.
• N/AHow much of the stock trades on an average day: $7,337MMARKET · Broadcom trades so much volume that this basically isn't a concern. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• FAILShare of revenue from its single biggest customer: 32%TEXT (dealbreaker) · Broadcom's December 18, 2025 10-K names a single customer at 32% of revenue, in its own words: "Direct sales to one semiconductor solutions customer, which is a distributor, accounted for 32% and 28% of our net revenue for fiscal years 2025 and 2024, respectively". More than a quarter of the top line riding on one buyer is a dealbreaker for me. No discount to fair value survives that customer deciding to leave, and the decision isn't Broadcom's to make. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. Broadcom hasn't changed auditors in the last 2 years, so there's no such red flag here.