Financial Analysis: Broadcom (AVGO) and Aquantia (AQ)

Broadcom (NASDAQ: AVGO) and Aquantia (NYSE:AQ) are both computer and technology companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, valuation, dividends and profitability.

Insider and Institutional Ownership

86.7% of Broadcom shares are owned by institutional investors. Comparatively, 22.6% of Aquantia shares are owned by institutional investors. 3.3% of Broadcom shares are owned by company insiders. Comparatively, 24.1% of Aquantia shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Broadcom and Aquantia’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Broadcom 41.37% 29.50% 13.75%
Aquantia N/A N/A N/A

Analyst Ratings

This is a summary of current ratings and price targets for Broadcom and Aquantia, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Broadcom 0 2 32 1 2.97
Aquantia 0 0 5 0 3.00

Broadcom presently has a consensus target price of $310.26, suggesting a potential upside of 27.13%. Aquantia has a consensus target price of $14.80, suggesting a potential upside of 25.74%. Given Broadcom’s higher possible upside, equities research analysts clearly believe Broadcom is more favorable than Aquantia.

Valuation & Earnings

This table compares Broadcom and Aquantia’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Broadcom $17.64 billion 5.68 $1.69 billion $14.30 17.07
Aquantia $103.37 million 3.82 -$5.41 million ($0.48) -24.52

Broadcom has higher revenue and earnings than Aquantia. Aquantia is trading at a lower price-to-earnings ratio than Broadcom, indicating that it is currently the more affordable of the two stocks.

Dividends

Broadcom pays an annual dividend of $7.00 per share and has a dividend yield of 2.9%. Aquantia does not pay a dividend. Broadcom pays out 49.0% of its earnings in the form of a dividend.

Summary

Broadcom beats Aquantia on 13 of the 16 factors compared between the two stocks.

Broadcom Company Profile

Broadcom Limited designs, develops, and supplies a range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. The Wired Infrastructure segment provides set-top box system-on-chips (SoCs); cable, digital subscriber line, and passive optical networking central office/consumer premise equipment SoCs; Ethernet switching and routing application products; embedded processors and controllers; serializer/deserializer application specific integrated circuits; optical and copper, and physical layers; and fiber optic laser and receiver components. The Wireless Communications segment offers RF front end modules, filters, and power amplifiers; Wi-Fi, Bluetooth, and global positioning system/global navigation satellite system SoCs; and custom touch controllers. The Enterprise Storage segment provides serial attached small computer system interface, and redundant array of independent disks controllers and adapters; peripheral component interconnect express switches; fiber channel host bus adapters; read channel based SoCs; and preamplifiers. The Industrial & Other segment offers optocouplers, industrial fiber optics, motion control encoders and subsystems, and light emitting diodes. Its products are used in various applications, including enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. The company was formerly known as Avago Technologies Limited and changed its name to Broadcom Limited in February 2016. Broadcom Limited was founded in 2005 and is headquartered in Singapore.

Aquantia Company Profile

Aquantia Corp., together with its subsidiaries, designs, develops, and markets advanced high-speed communication integrated circuits for Ethernet connectivity in the data center, enterprise infrastructure, and access markets worldwide. Its products include corporate and cloud data center products; enterprise infrastructure products; and access products, such as client connectivity and carrier access. The company sells its products to integrated circuit suppliers, original equipment manufacturers, and original design manufacturers through direct sales. Aquantia Corp. was founded in 2004 and is headquartered in San Jose, California.

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