Disclosed on October 7, Hock E Tan, President and CEO at Broadcom AVGO, executed a substantial insider sell as per the latest SEC filing.

What Happened: After conducting a thorough analysis, Tan sold 40,000 shares of Broadcom. This information was disclosed in a Form 4 filing with the U.S. Securities and Exchange Commission on Monday. The total transaction value is $6,943,980.

Broadcom‘s shares are actively trading at $179.25, experiencing a up of 2.38% during Tuesday’s morning session.

Get to Know Broadcom Better

Broadcom is the sixth-largest semiconductor company globally and has expanded into various software businesses, with over $30 billion in annual revenue. It sells 17 core semiconductor product lines across wireless, networking, broadband, storage, and industrial markets. It is primarily a fabless designer but holds some manufacturing in-house, like for its best-of-breed FBAR filters that sell into the Apple iPhone. In software, it sells virtualization, infrastructure, and security software to large enterprises, financial institutions, and governments.Broadcom is the product of consolidation. Its businesses are an amalgamation of former companies like legacy Broadcom and Avago Technologies in chips, as well as Brocade, CA Technologies, and Symantec in software.

Broadcom’s Financial Performance

Revenue Growth: Broadcom’s remarkable performance in 3 months is evident. As of 31 July, 2024, the company achieved an impressive revenue growth rate of 47.27%. This signifies a substantial increase in the company’s top-line earnings. As compared to competitors, the company surpassed expectations with a growth rate higher than the average among peers in the Information Technology sector.

Profitability Metrics: Unlocking Value

• Gross Margin: The company sets a benchmark with a high gross margin of 63.92%, reflecting superior cost management and profitability compared to its peers.

• Earnings per Share (EPS): Broadcom’s EPS reflects a decline, falling below the industry average with a current EPS of -0.4.

Debt Management: The company faces challenges in debt management with a debt-to-equity ratio higher than the industry average. With a ratio of 1.07, caution is advised due to increased financial risk.

Valuation Overview:

• Price to Earnings (P/E) Ratio: The current Price to Earnings ratio of 141.53 is higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.

• Price to Sales (P/S) Ratio: A higher-than-average P/S ratio of 17.35 suggests overvaluation in the eyes of investors, considering sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): Broadcom’s EV/EBITDA ratio, surpassing industry averages at 40.12, positions it with an above-average valuation in the market.

Market Capitalization: Positioned above industry average, the company’s market capitalization underscores its superiority in size, indicative of a strong market presence.

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Uncovering the Importance of Insider Activity

Considering insider transactions is valuable, but it’s crucial to evaluate them in conjunction with other investment factors.

In the context of legal matters, the term “insider” refers to any officer, director, or beneficial owner holding more than ten percent of a company’s equity securities, as outlined by Section 12 of the Securities Exchange Act of 1934. This includes executives in the c-suite and significant hedge funds. Such insiders are obligated to report their transactions through a Form 4 filing, which must be completed within two business days of the transaction.

Pointing towards optimism, a company insider’s new purchase signals their positive anticipation for the stock to rise.

Despite insider sells not always signaling a bearish sentiment, they can be driven by various factors.

Exploring Key Transaction Codes

Surveying the realm of stock transactions, investors often give prominence to those unfolding in the open market, systematically detailed in Table I of the Form 4 filing. A P in Box 3 indicates a purchase, while S signifies a sale. Transaction code C denotes the conversion of an option, and transaction code A denotes a grant, award, or other acquisition of securities from the company.

Check Out The Full List Of Broadcom’s Insider Trades.

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This article was generated by Benzinga’s automated content engine and reviewed by an editor.