Broadcom’s $221.17 DCF Valuation Implies 45.7% Overvaluation
Broadcom's intrinsic value at $221.17 per share based on an earnings DCF versus current trading at $322.16 implies a -45.66% margin of safety, signalling modest overvaluation. A free cash flow DCF yields an intrinsic value of $185.59 per share, deepening the margin to -73.59%.
1. Two-Stage DCF Model
Broadcom’s valuation employs a two-stage discounted earnings model using EPS without non-recurring items of $7.27, applying a 19.6% growth rate for 10 years followed by a 4% terminal growth rate, all discounted at 11% based on a 10-year Treasury rate plus a 6% equity risk premium.
2. Earnings-Based Intrinsic Value Results
The earnings-based DCF calculation yields an intrinsic value of $221.17 per share compared with the current trading price of $322.16, resulting in a -45.66% margin of safety that indicates modest overvaluation.
3. Free Cash Flow DCF Valuation
Using trailing twelve-month free cash flow per share in a traditional DCF model produces an intrinsic value of $185.59 per share, corresponding to a -73.59% margin of safety and signaling deeper overvaluation under cash flow assumptions.