Company ProfileÂ (excerpt from Reuters): Nvidia Corporation, incorporated on February 24, 1998, focuses on personal computer (PC) graphics, graphics processing unit (GPU) and also on artificial intelligence (AI). The Company provides service to its customers through PC, mobile and cloud architectures. The Company operates through two segments: GPU and Tegra Processor, which are based on a single underlying architecture. The Company’s processor has created platforms that address four markets: Gaming, Professional Visualization, Datacenter, and Automotive. The Company’s GPU product brands are aimed at specialized markets, including GeForce for gamers; Quadro for designers; Tesla and DGX for AI data scientists and big data researchers, and GRID for cloud-based visual computing users. The Company’s Tegra brand integrates an entire computer onto a single chip, and incorporates GPUs and multi-core central processing units (CPUs) to drive supercomputing for mobile gaming and entertainment devices, as well as autonomous robots, drones and cars. NVIDIA has evolved the GPU into a computer brain at the intersection of virtual reality, high performance computing, or high-performance computing (HPC) and artificial intelligence.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$87,473,996,276||Pass|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||7.08||Pass|
|3. Earnings Stability||Positive EPS for 10 years prior||Fail|
|4. Dividend Record||Dividend Payments for 10 years prior||Fail|
|5. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||1039.20%||Pass|
|6. Moderate PEmg Ratio||PEmg < 20||33.34||Fail|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||9.46||Fail|
|Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.|
|1. Sufficiently Strong Financial Condition||Current Ratio > 1.5||7.08||Pass|
|2. Sufficiently Strong Financial Condition||Debt to NCA < 1.1||0.20||Pass|
|3. Earnings Stability||Positive EPS for 5 years prior||Pass|
|4. Dividend Record||Currently Pays Dividend||Pass|
|5. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||15.00%|
|MG Value based on 3% Growth||$62.37|
|MG Value based on 0% Growth||$36.56|
|Market Implied Growth Rate||12.42%|
|% of Intrinsic Value||86.59%|
NVIDIA Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.9 in 2015 to an estimated $4.3 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 12.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into NVIDIA Corporation revealed the company was trading above its Graham Number of $43.59. The company pays a dividend of $0.57 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 33.34, which was above the industry average of 33.25. Finally, the company was trading above its Net Current Asset Value (NCAV) of $11.53.
NVIDIA Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||$11.53|
|Number of Consecutive Years of Dividend Growth||6|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||10/1/2018|
|Total Current Assets||$11,386,000,000|
|Total Current Liabilities||$1,608,000,000|
|Shares Outstanding (Diluted Average)||625,000,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$6.85|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$4.30|
Other ModernGraham posts about the company
Other ModernGraham posts about related companies
The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.