Broadcom Trades at 71 Times Earnings and 27 Times Next Year's. History Says Which Side Gives.
The chip and software giant's reported profits more than doubled over the past year -- which happens to be how this gap closed both times before.
Overview
Broadcom (NASDAQ: AVGO) costs about 71 times the profits it reported over the past year. The same stock costs about 27 times the profits analysts expect over the next one. Both numbers describe the same share price of about $428 as of this writing, and the difference sits entirely in the earnings.
A spread that wide can only resolve two ways. Reported earnings rise to meet the price, or the price falls to meet the earnings. Which side gives?
Details
Broadcom's own history has an answer, I'd argue, because the company has run this exact setup twice in the past five years. Both times, the earnings did the closing.
Source
Originally published at www.fool.com.