Broadcom Inc. (AVGO) vs Targa Resources Corp. (TRGP): Which Is the Better Buy in 2026?
As of 2026-06-19, AVGO is overvalued at $411, with a DCF intrinsic value of $258 and a margin of safety of -59%. TRGP is overvalued at $259, with an intrinsic value of $50 and a margin of safety of -422%. Of the two, AVGO has the wider margin of safety.
Rewards
- ★Gross margin of 76.3% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Free cash flow has grown at a 18.2% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Each dollar of retained earnings has created $11.66 of earning power — management is an exceptional capital allocator.
- ★Targa Resources Corp. has maintained ROIC above 10% for 4 consecutive years, suggesting solid business economics.
- ★Return on equity has consistently exceeded 20% over 4 years, indicating efficient use of shareholder capital.
- ★Each dollar of retained earnings has created $2.97 of earning power — management is an exceptional capital allocator.
Risks
- ⚠ROIC has declined by 6.5 percentage points over the past 4 years, which may signal competitive erosion.
- ⚠Share count has increased by 13% over the past 4 years, diluting existing shareholders.
- ⚠FCF yield of 1.4% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠High leverage (5.82x net debt/equity) combined with thin interest coverage (-1.0x) poses financial risk.
- ⚠Insiders have sold $2.7M worth of stock in the past 3 months — significant insider liquidation.
- ⚠Free cash flow has declined at a 17.7% CAGR over the past 4 years — a concerning trend.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $411?
The market implies +23.6% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +25.6%, reflecting heavy growth investment.
Requires positive FCF to compute implied growth rate.
Economic Moat Score
Learn more →Narrow moat with reinvestment efficiency as the key competitive advantage. Improving revenue predictability would strengthen the moat.
Narrow moat with roic consistency as the key competitive advantage. Improving reinvestment efficiency would strengthen the moat.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pricing this stock without strong emotion in either direction"
"Market is optimistic — be cautious and ensure you have a margin of safety"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: AVGO vs TRGP
Is Broadcom Inc. or Targa Resources Corp. more undervalued in 2026?▼
Based on our discounted cash flow model, AVGO trades at a -59.4% margin of safety (intrinsic value $258 vs. price $411), compared to TRGP's -421.7% margin of safety (intrinsic $50 vs. $259).
Which stock has a wider economic moat, Broadcom Inc. or Targa Resources Corp.?▼
AVGO scores 61/100 (Narrow moat), while TRGP scores 54/100 (Narrow moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is Targa Resources Corp. in financial distress?▼
TRGP's Altman Z-Score of 2.3 places it in the Grey zone, signaling elevated bankruptcy risk. AVGO scores 12.0 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which company has better free cash flow, Broadcom Inc. or Targa Resources Corp.?▼
Broadcom Inc. (AVGO) generates a 1.4% free cash flow yield, compared to Targa Resources Corp.'s -0.6%. A higher FCF yield means the business converts more of its market value into cash that can be returned to shareholders or reinvested.
Which stock has higher return on invested capital, Broadcom Inc. or Targa Resources Corp.?▼
AVGO earns 19.1% ROIC versus TRGP's 12.2%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Which dividend is safer, Broadcom Inc.'s or Targa Resources Corp.'s?▼
AVGO's dividend earns a safety score of 94/100 (Very Safe), compared to TRGP's 64/100 (Safe). AVGO has raised its dividend for 3 consecutive years.