ONE LEVEL DEEPER
AVGO
Warren Buffett frameworkThe Owner-OperatorBenjamin Graham frameworkThe Value ArchitectMichael Mauboussin frameworkThe Expectations EngineerHoward Marks frameworkThe Cycle WhispererPeter Lynch frameworkThe Everyday Edge

Fast grower at 25.2% growth trades at PEG of 2.1 while insiders sold $1.25B during record margins.

cautiousNeutralconviction

A fast-growing semiconductor giant at 25.2% growth trades at PEG of 2.1, where insiders sell relentlessly into institutional buying while margins hit historic highs.

THE LENSES
THE CLASSIFICATIONexceptional

Is this a fast grower, stalwart, slow grower, cyclical, turnaround, or asset play?

TTM revenue growth of 25.2% firmly in fast grower territory
Revenue accelerated from $11.96B in Q1'24 to $19.31B in Q1'26 (61.4% YoY)
Operating margin expanded from 17.4% to 44.95% over eight quarters
Semiconductor Solutions grew to $11.14B (57.7% of total) in Q1'26

This framework sees a textbook fast grower — revenue growing above 20% with expanding margins. The 61.4% YoY growth in Q1'26 shows acceleration, not deceleration, placing it in Lynch's favorite category where "10-to-40-baggers" are found.

Revenue
THE PEG RATIOexpensive

Does the P/E ratio equal the growth rate?

P/E ratio of 53.4x versus 25.2% TTM revenue growth yields PEG of 2.1
Market implies only 7.66% perpetual growth versus 25.2% trailing
Earnings yield of 0.47% versus 4.33% treasury yield
EPS grew from $16.41 in Q1'24 to $46.41 in Q1'26 (183% growth)

Applying this lens reveals a PEG above 2.0, suggesting investors pay significant premium for the growth. While earnings growth of 183% exceeds the P/E ratio, the framework prefers PEG below 1.0, and this trades at twice that threshold.

P/E Ratio
WHAT THE INSIDERS KNOWalarming

Are insiders buying with their own money?

Net selling for 11 consecutive quarters through Q1'26
Estimated $1.25B in insider selling over trailing four quarters
CEO compensation of $161.8M heavily stock-based with only $1.2M salary
Selling occurred during period of record 44.95% operating margins

This framework sees a clear negative signal — insiders selling relentlessly during the company's most profitable period ever. Lynch taught that insiders sell for many reasons but buy for only one, and here we see zero buying against massive selling.

Insider Net Buying/Selling
WHERE IN THE STORYmature

Are we in the early, middle, or late innings of this growth story?

Operating margins hit 90th percentile at 44.95% in Q1'26
Market implies growth deceleration from 25.2% to 7.66%
Institutional ownership at 77.43%, up from 74.98%
52 buy ratings versus 5 hold ratings shows consensus optimism

Applying this framework suggests late-middle innings — growth remains strong but margins at historic highs leave little room for expansion. The market's implied growth deceleration and peak institutional ownership indicate the easy gains are behind us.

Operating Margin
KEY NUMBERS
VERDICT

This framework sees a fast grower trading at a PEG above 2.0 while insiders sell into strength and margins peak. The growth story remains clear and execution flawless, but Lynch would note that when insiders sell $1.25 billion during record profitability, they might know something the 52 buy-rated analysts don't. At 53x earnings with treasury yields at 4.33%, is this paying too much for growth that's already decelerating?

This analysis applies Peter Lynch's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Peter Lynch. Educational purposes only. Not financial advice.

OTHER PERSPECTIVES
Michael Mauboussin framework
The Expectations Engineer
Bullish
Warren Buffett framework
The Owner-Operator
Neutral
Benjamin Graham framework
The Value Architect
Leaning Bearish
Howard Marks framework
The Cycle Whisperer
Bearish
Explore
Fortinet, Inc.FTNTWalmart Inc.WMTTesla, Inc.TSLAAdobe Inc.ADBECostco Wholesale CorporationCOSTAmazon.com, Inc.AMZN
EDUCATIONAL ONLY · NOT FINANCIAL ADVICEv2