AVGO Holdings, Inc. (AVGO)vs SHOP Holdings, Inc. (SHOP)

Quick verdict

AVGO Holdings, Inc. (AVGO) and SHOP Holdings, Inc. (SHOP) appeal to different investors. On our six-factor framework, AVGO scores 2.5 and SHOP scores 3.5. SHOP looks cheaper on the multiples that matter, while AVGO grows faster and neither clearly earns higher returns on capital. Overall, SHOP edges this comparison, but the right pick depends on whether you prioritise value, growth, income or balance-sheet safety.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

AVGO Holdings, Inc. operates in Credit Services (Financial Services), while SHOP Holdings, Inc. sits in Beverages (Consumer Defensive). The two operate in different sectors, so cyclicality and end-market exposure differ — factor that into any portfolio overlap. AVGO carries a beta of 1.30 versus 0.64 for SHOP, meaning AVGO has historically been the more volatile of the two.

Valuation

On valuation, SHOP is the cheaper stock. AVGO trades on a forward P/E of 17.33 and EV/EBITDA of 17.22, against 16.83 and 10.2 for SHOP. Price-to-sales is 9.76 vs 3.26, and free-cash-flow yield is 4.6% vs 2.0%. A higher multiple is only justified if the company can sustain faster growth or wider margins, which is exactly what the next sections test.

Growth profile

AVGO is the faster grower. AVGO has compounded revenue at 20.9% over three years with EPS growth of 29.3%, while SHOP has delivered 4.0% revenue and 3.5% EPS growth. Growth like this is the single biggest driver of long-term returns, but it also tends to come with a richer valuation, so it must be weighed against the multiples above.

Profitability and quality

On profitability and quality, neither clearly is stronger. AVGO posts a 35.1% operating margin, 23.1% return on equity and 8.1% return on invested capital. SHOP posts 15.5%, 47.7% and 8.3% respectively. Return on invested capital above roughly 15% is a hallmark of a durable competitive advantage, so this metric deserves particular attention.

Balance-sheet risk

SHOP has the safer balance sheet. AVGO carries net-debt/EBITDA of 3.11x with a current ratio of 0.83, versus 0.69x and 3.24 for SHOP. Lower leverage gives a company more room to invest through a downturn and reduces the risk of dilution or distress.

Price performance and shareholder returns

Over the past year AVGO returned 95.6% against 42.9% for SHOP; on a three-year annualised basis it is 19.0% vs 16.6%. AVGO yields 0.0% and SHOP yields 1.4%. Past performance never guarantees future results, but the multi-year track record shows how the market has rewarded each business so far.

Which stock fits which investor

For value-oriented investors, SHOP is the better fit on today's multiples. Growth investors will likely prefer AVGO, which is expanding faster. Income investors should lean toward SHOP for its higher shareholder yield, while investors who prize quality-at-a-reasonable-price will favour SHOP for its superior returns on capital. This is a comparison of facts, not a recommendation — your time horizon, risk tolerance and existing holdings should drive the final decision.

• Value: SHOP
• Growth: AVGO
• Income: SHOP
• Quality: SHOP

Frequently asked questions

Is AVGO or SHOP the better buy right now?

Neither is universally "better." AVGO scores 2.5 and SHOP scores 3.5 on our six-factor framework. SHOP is cheaper, AVGO grows faster, and neither clearly is higher quality — so the right pick depends on your objective.

Which stock is cheaper, AVGO or SHOP?

SHOP is the cheaper stock across forward P/E (17.33 vs 16.83), EV/EBITDA (17.22 vs 10.2) and price-to-sales (9.76 vs 3.26).

Which has grown faster, AVGO or SHOP?

AVGO has the stronger growth profile, with three-year revenue CAGR of 20.9% for AVGO versus 4.0% for SHOP.

Which stock pays a bigger dividend?

AVGO yields 0.0% and SHOP yields 1.4%, so SHOP is the stronger income choice.

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