Analyzing ARM Holdings In Comparison To Competitors In Semiconductors & Semiconductor Equipment Industry

Arm Holdings Ltd. -16.90%

Arm Holdings Ltd.

ARM

87.19

-16.90%

In today's fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating ARM Holdings (NASDAQ:ARM) in relation to its major competitors in the Semiconductors & Semiconductor Equipment industry. By closely examining key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and highlight company's performance in the industry.

ARM Holdings Background

Arm Holdings is the IP owner and developer of the ARM architecture (ARM stands for Acorn RISC Machine), which is used in 99% of the world's smartphone CPU cores, and it also has high market share in other battery-powered devices like wearables, tablets, or sensors. Arm licenses its architecture for a fee, offering different types of licenses depending on the flexibility the customer needs. Customers like Apple or Qualcomm buy architectural licenses, which allows them to modify the architecture and add or delete instructions to tailor the chips to their specific needs. Other clients directly buy off-the-shelf designs from Arm. Both off-the-shelf and architectural customers pay a royalty fee per chip shipped.

Company P/E P/B P/S ROE EBITDA (in billions) Gross Profit (in billions) Revenue Growth
ARM Holdings PLC 422.91 15.95 26.82 -2.45% $-0.12 $0.76 27.94%
NVIDIA Corp 65.19 36.69 27.42 30.42% $10.96 $13.4 205.51%
Taiwan Semiconductor Manufacturing Co Ltd 19.28 5.02 7.78 6.46% $392.33 $296.64 -10.83%
Broadcom Inc 34.15 21.98 13.43 15.3% $5.3 $6.41 4.09%
Advanced Micro Devices Inc 1328.45 4.29 10.73 0.54% $1.13 $2.75 4.22%
Qualcomm Inc 22.35 7.52 4.58 7.05% $2.06 $4.75 -24.26%
Texas Instruments Inc 22.18 9.35 8.66 10.44% $2.34 $2.81 -13.53%
Analog Devices Inc 30.44 2.78 8.20 1.39% $1.18 $1.65 -16.36%
Microchip Technology Inc 19.98 7.07 5.63 9.66% $1.1 $1.53 8.74%
STMicroelectronics NV 10.97 2.98 2.76 7.28% $1.69 $2.11 2.55%
ON Semiconductor Corp 17.15 4.89 4.58 8.05% $0.87 $1.03 -0.54%
GLOBALFOUNDRIES Inc 24.50 3.19 4.53 2.34% $0.64 $0.53 -10.7%
United Microelectronics Corp 9.63 1.92 2.84 4.72% $29.0 $20.46 -24.3%
ASE Technology Holding Co Ltd 17.14 2.13 1.05 3.06% $28.07 $24.92 -18.27%
First Solar Inc 39.01 2.92 5.84 4.35% $0.37 $0.38 27.37%
Skyworks Solutions Inc 18.67 3.01 3.84 4.09% $0.4 $0.48 -13.37%
Lattice Semiconductor Corp 46.91 15.72 13.44 8.96% $0.07 $0.13 11.4%
Universal Display Corp 44.70 6.60 15.61 3.77% $0.06 $0.11 -12.13%
Rambus Inc 26.14 7.71 16.37 10.86% $0.12 $0.08 -6.19%
MACOM Technology Solutions Holdings Inc 74.49 7.24 10.51 2.63% $0.05 $0.09 -15.59%
Allegro Microsystems Inc 23.93 5.46 5.66 6.18% $0.09 $0.16 15.92%
Average 94.76 7.92 8.67 7.38% $23.89 $19.02 5.69%

By analyzing ARM Holdings, we can infer the following trends:

  • At 422.91, the stock's Price to Earnings ratio significantly exceeds the industry average by 4.46x, suggesting a premium valuation relative to industry peers.

  • With a Price to Book ratio of 15.95, which is 2.01x the industry average, ARM Holdings might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.

  • With a relatively high Price to Sales ratio of 26.82, which is 3.09x the industry average, the stock might be considered overvalued based on sales performance.

  • The company has a lower Return on Equity (ROE) of -2.45%, which is 9.83% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.

  • The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $-120 Million is -0.01x below the industry average, suggesting potential lower profitability or financial challenges.

  • The gross profit of $760 Million is 0.04x below that of its industry, suggesting potential lower revenue after accounting for production costs.

  • The company is experiencing remarkable revenue growth, with a rate of 27.94%, outperforming the industry average of 5.69%.

Debt To Equity Ratio

debt to equity

The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

When examining ARM Holdings in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:

  • ARM Holdings is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.04.

  • This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.

Key Takeaways

ARM Holdings has a high PE ratio, indicating that its stock price is relatively high compared to its earnings. The high PB ratio suggests that the stock is trading at a premium to its book value. The high PS ratio indicates that the stock is trading at a premium to its sales. The low ROE suggests that the company is not generating a high return on its shareholders' equity. The low EBITDA and gross profit indicate that the company's profitability is relatively low. However, the high revenue growth suggests that the company is experiencing strong sales growth compared to its peers in the Semiconductors & Semiconductor Equipment industry.

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

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