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NVIDIA Corp Valuation – January 2019 $NVDA

Company Profile (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:

ModernGraham Valuation of NVDA – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

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

EPSmg $4.30
MG Growth Estimate 15.00%
MG Value $165.60
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $62.37
MG Value based on 0% Growth $36.56
Market Implied Growth Rate 12.42%
Current Price $143.40
% 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
Graham Number $43.59
PEmg 33.34
Current Ratio 7.08
PB Ratio 9.46
Current Dividend $0.57
Dividend Yield 0.40%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

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
Long-Term Debt $1,987,000,000
Total Assets $13,657,000,000
Intangible Assets $667,000,000
Total Liabilities $4,182,000,000
Shares Outstanding (Diluted Average) 625,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.85
Jan2018 $4.82
Jan2017 $2.57
Jan2016 $1.08
Jan2015 $1.12
Jan2014 $0.74
Jan2013 $0.90
Jan2012 $0.94
Jan2011 $0.43
Jan2010 -$0.12
Jan2009 -$0.05
Jan2008 $1.31
Jan2007 $0.77
Jan2006 $0.55
Jan2005 $0.17
Jan2004 $0.14
Jan2003 $0.18
Jan2002 $0.34
Jan2001 $0.21
Jan2000 $0.09
Jan1999 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.30
Jan2018 $2.71
Jan2017 $1.53
Jan2016 $0.99
Jan2015 $0.90
Jan2014 $0.72
Jan2013 $0.62
Jan2012 $0.48
Jan2011 $0.33
Jan2010 $0.35
Jan2009 $0.57
Jan2008 $0.78
Jan2007 $0.47
Jan2006 $0.30
Jan2005 $0.19
Jan2004 $0.20
Jan2003 $0.21

Recommended Reading:

Other ModernGraham posts about the company

NVIDIA Corp Valuation – March 2018 $NVDA
Nvidia Corporation Valuation – June 2016 $NVDA
NVIDIA Corporation Valuation – November 2015 Update $NVDA
The Best Stocks of the IT Hardware Industry – September 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

NVIDIA Corp Valuation – March 2018 $NVDA

Company Profile (obtained from Marketwatch): NVIDIA Corp. designs and manufactures computer graphics processors, chipsets, and related multimedia software. It operates through the following segments: Graphics Processing Unit and Tegra Processor. The Graphics Processing Unit segment includes sales of the company’s GeForce discrete and chipset products that supports desktop and notebook PCs plus license fees from Intel and sales of memory products. The Tegra Processors segment provides processors that deliver superior visual and multimedia experience on tablets, smart phones and gaming devices while consuming minimal power. The company was founded by Jen-Hsun Huang, Chris A. Malachowsky and Curtis R. Priem in January 1993 and is headquartered in Santa Clara, CA.

NVDA Chart

NVDA data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NVDA – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $148,670,001,472 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 8.03 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 907.20% Pass
6. Moderate PEmg Ratio PEmg < 20 65.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 20.65 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 8.03 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.25 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

EPSmg $3.75
MG Growth Estimate 15.00%
MG Value $144.43
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $54.39
MG Value based on 0% Growth $31.89
Market Implied Growth Rate 28.45%
Current Price $245.33
% of Intrinsic Value 169.87%

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 Overvalued after growing its EPSmg (normalized earnings) from $0.9 in 2015 to an estimated $3.75 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 28.45% 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 below the price.

At the time of valuation, further research into NVIDIA Corporation revealed the company was trading above its Graham Number of $37.98. The company pays a dividend of $0.57 per share, for a yield of 0.2% Its PEmg (price over earnings per share – ModernGraham) was 65.4, which was above the industry average of 48.19. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.72.

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) $8.72
Graham Number $37.98
PEmg 65.40
Current Ratio 8.03
PB Ratio 20.65
Current Dividend $0.57
Dividend Yield 0.23%
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $9,255,000,000
Total Current Liabilities $1,153,000,000
Long-Term Debt $1,985,000,000
Total Assets $11,241,000,000
Intangible Assets $670,000,000
Total Liabilities $3,770,000,000
Shares Outstanding (Diluted Average) 629,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.20
Jan2018 $4.82
Jan2017 $2.57
Jan2016 $1.08
Jan2015 $1.12
Jan2014 $0.74
Jan2013 $0.90
Jan2012 $0.94
Jan2011 $0.43
Jan2010 -$0.12
Jan2009 -$0.05
Jan2008 $1.31
Jan2007 $0.77
Jan2006 $0.55
Jan2005 $0.17
Jan2004 $0.14
Jan2003 $0.18
Jan2002 $0.34
Jan2001 $0.21
Jan2000 $0.09
Jan1999 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.75
Jan2018 $2.71
Jan2017 $1.53
Jan2016 $0.99
Jan2015 $0.90
Jan2014 $0.72
Jan2013 $0.62
Jan2012 $0.48
Jan2011 $0.33
Jan2010 $0.35
Jan2009 $0.57
Jan2008 $0.78
Jan2007 $0.47
Jan2006 $0.30
Jan2005 $0.19
Jan2004 $0.20
Jan2003 $0.21

Recommended Reading:

Other ModernGraham posts about the company

NVIDIA Corporation Valuation – November 2015 Update $NVDA
The Best Stocks of the IT Hardware Industry – September 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
Nvidia Corporation Analysis – August 2015 Update $NVDA
47 Companies in the Spotlight This Week – 5/16/15

Other ModernGraham posts about related companies

Seagate Technology PLC Valuation – March 2018 $STX
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Nvidia Corporation Valuation – June 2016 $NVDA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – March 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Nvidia Corporation (NVDA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): NVIDIA Corporation (NVIDIA) is engaged in visual computing. The Company operates through segments, including GPU and Tegra Processor. Its GPU businesses include GeForce for personal computer (PC) gaming; Quadro for design professionals working in computer-aided design, video editing, special effects and other creative applications; Tesla for deep learning and accelerated computing, leveraging the parallel computing capabilities of graphics processing units (GPUs) for general purpose computing, and GRID to provide the power of NVIDIA graphics through the cloud and datacenters. The Company’s Tegra processors are primarily designed to enable its branded platforms: DRIVE and SHIELD. Tegra is also sold to original equipment manufacturers (OEMs) for devices. DRIVE automotive computers provide supercomputing capabilities to make driving safer. SHIELD consists of a family of devices designed to harness the power of mobile-cloud to revolutionize gaming.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of NVDA – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,056,373,569 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.44 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 217.54% Pass
6. Moderate PEmg Ratio PEmg < 20 40.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.57 Fail
Score
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 2.44 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 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

NVDA value chart June 2016

EPSmg $1.14
MG Growth Estimate 12.80%
MG Value $39.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $16.59
MG Value based on 0% Growth $9.72
Market Implied Growth Rate 15.94%
Current Price $46.20
% of Intrinsic Value 118.45%

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 Overvalued after growing its EPSmg (normalized earnings) from $0.62 in 2013 to an estimated $1.14 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.94% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

NVIDIA Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

NVDA charts June 2016

Net Current Asset Value (NCAV) $4.82
Graham Number $15.73
PEmg 40.38
Current Ratio 2.44
PB Ratio 6.57
Current Dividend $0.43
Dividend Yield 0.92%
Number of Consecutive Years of Dividend Growth 5

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2016
Total Current Assets $5,790,000,000
Total Current Liabilities $2,377,000,000
Long-Term Debt $9,000,000
Total Assets $7,108,000,000
Intangible Assets $773,000,000
Total Liabilities $2,912,000,000
Shares Outstanding (Diluted Average) 597,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.42
Jan2016 $1.08
Jan2015 $1.12
Jan2014 $0.74
Jan2013 $0.90
Jan2012 $0.94
Jan2011 $0.43
Jan2010 -$0.12
Jan2009 -$0.05
Jan2008 $1.31
Jan2007 $0.77
Jan2006 $0.55
Jan2005 $0.19
Jan2004 $0.14
Jan2003 $0.18
Jan2002 $0.34
Jan2001 $0.21
Jan2000 $0.09
Jan1999 $0.01

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.14
Jan2016 $0.99
Jan2015 $0.90
Jan2014 $0.72
Jan2013 $0.62
Jan2012 $0.48
Jan2011 $0.33
Jan2010 $0.35
Jan2009 $0.57
Jan2008 $0.79
Jan2007 $0.47
Jan2006 $0.31
Jan2005 $0.20
Jan2004 $0.20
Jan2003 $0.21
Jan2002 $0.19
Jan2001 $0.10

Recommended Reading:

Other ModernGraham posts about the company

NVIDIA Corporation Valuation – November 2015 Update $NVDA
The Best Stocks of the IT Hardware Industry – September 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
Nvidia Corporation Analysis – August 2015 Update $NVDA
47 Companies in the Spotlight This Week – 5/16/15

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Garmin Ltd Stock Valuation – February 2016 $GRMN
Emerson Electric Co Valuation – February 2016 $EMR
Applied Materials Inc Valuation – February 2016 $AMAT

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

NVIDIA Corporation Valuation – November 2015 Update $NVDA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how NVIDIA Corporation (NVDA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): NVIDIA Corporation (NVIDIA) is engaged in visual computing, enabling individuals to interact with digital ideas, data and entertainment. The Company is engaged in creating NVIDIA-branded products and services, offering its processors to original equipment manufacturers (OEMs), and licensing its intellectual property. NVIDIA-branded products and services are visual computing platforms that address four markets: Gaming, Enterprise, High Performance Computing & Cloud, and Automotive. The Company operates in two segments: Graphics Processing Unit (GPU) and Tegra Processor. The Company’s GPU product brands include GeForce for gamers; Quadro for designers; Tesla for researchers, learning and big-data analysts; and GRID for cloud-based visual computing users. The Company’s Tegra processors are primarily designed to enable its branded platforms: DRIVE and SHIELD.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of NVDA – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,350,564,719 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.82 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 18.40% Fail
6. Moderate PEmg Ratio PEmg < 20 37.48 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.66 Fail
Score
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 6.82 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.28 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

NVDA value Chart November 2015

EPSmg $0.81
MG Growth Estimate 10.05%
MG Value $23.14
Opinion Overvalued
MG Value based on 3% Growth $11.74
MG Value based on 0% Growth $6.88
Market Implied Growth Rate 14.49%
Current Price $30.33
% of Intrinsic Value 131.05%

NVIDIA Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, short 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 based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.48 in 2012 to an estimated $0.81 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 14.49% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on NVIDIA Corporation (NVDA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

NVDA Charts November 2015

Net Current Asset Value (NCAV) $5.80
Graham Number $10.03
PEmg 37.48
Current Ratio 6.82
PB Ratio 3.66
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 4

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $5,834,000,000
Total Current Liabilities $855,000,000
Long-Term Debt $1,417,000,000
Total Assets $7,174,000,000
Intangible Assets $790,000,000
Total Liabilities $2,709,000,000
Shares Outstanding (Diluted Average) 539,000,000

Earnings Per Share History

Next Fiscal Year Estimate $0.54
Jan15 $1.12
Jan14 $0.74
Jan13 $0.90
Jan12 $0.94
Jan11 $0.43
Jan10 -$0.12
Jan09 -$0.05
Jan08 $1.31
Jan07 $0.77
Jan06 $0.55
Jan05 $0.17
Jan04 $0.14
Jan03 $0.18
Jan02 $0.34
Jan01 $0.21
Jan00 $0.09
Jan99 $0.01

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.81
Jan15 $0.90
Jan14 $0.72
Jan13 $0.62
Jan12 $0.48
Jan11 $0.33
Jan10 $0.35
Jan09 $0.57
Jan08 $0.78
Jan07 $0.47
Jan06 $0.30
Jan05 $0.19
Jan04 $0.20
Jan03 $0.21
Jan02 $0.19
Jan01 $0.10
Jan00 $0.03

Recommended Reading:

Other ModernGraham posts about the company

The Best Stocks of the IT Hardware Industry – September 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
Nvidia Corporation Analysis – August 2015 Update $NVDA
47 Companies in the Spotlight This Week – 5/16/15
Nvidia Corporation Quarterly Valuation – May 2015 $NVDA

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Nvidia Corporation Analysis – August 2015 Update $NVDA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Nvidia Corporation (NVDA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): NVIDIA Corporation (NVIDIA) is engaged in visual computing, enabling individuals to interact with digital ideas, data and entertainment. The Company is engaged in creating NVIDIA-branded products and services, offering its processors to original equipment manufacturers (OEMs), and licensing its intellectual property. NVIDIA-branded products and services are visual computing platforms that address four markets: Gaming, Enterprise, High Performance Computing & Cloud, and Automotive. The Company operates in two segments: Graphics Processing Unit (GPU) and Tegra Processor. The Company’s GPU product brands include GeForce for gamers; Quadro for designers; Tesla for researchers, learning and big-data analysts; and GRID for cloud-based visual computing users. The Company’s Tegra processors are primarily designed to enable its branded platforms: DRIVE and SHIELD.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NVDA – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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

EPSmg 0.82
MG Growth Estimate 10.36%
MG Value $23.94
Opinion Fairly Valued
MG Value based on 3% Growth $11.88
MG Value based on 0% Growth $6.96
Market Implied Growth Rate 10.24%
Current Price $23.75
% of Intrinsic Value 99.22%

Nvidia Corporation qualifies for the Enterprising Investor but is not suitable for the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, the short dividend record, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.48 in 2012 to an estimated $0.82 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 10.24% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Nvidia Corporation (NVDA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

NVDA charts August 2015

Net Current Asset Value (NCAV) $5.45
PEmg 28.99
Current Ratio 6.60
PB Ratio 2.96
Dividend Yield 1.43%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $5,832,000,000
Total Current Liabilities $883,000,000
Long-Term Debt $1,404,000,000
Total Assets $7,291,000,000
Intangible Assets $823,000,000
Total Liabilities $2,735,000,000
Outstanding Shares 568,000,000

Earnings Per Share History

Next Fiscal Year Estimate $0.57
Jan15 $1.12
Jan14 $0.74
Jan13 $0.90
Jan12 $0.94
Jan11 $0.43
Jan10 -$0.12
Jan09 -$0.05
Jan08 $1.31
Jan07 $0.77
Jan06 $0.55
Jan05 $0.17
Jan04 $0.14
Jan03 $0.18
Jan02 $0.34
Jan01 $0.21
Jan00 $0.09
Jan99 $0.01

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.82
Jan15 $0.90
Jan14 $0.72
Jan13 $0.62
Jan12 $0.48
Jan11 $0.33
Jan10 $0.35
Jan09 $0.57
Jan08 $0.78
Jan07 $0.47
Jan06 $0.30
Jan05 $0.19
Jan04 $0.20
Jan03 $0.21
Jan02 $0.19
Jan01 $0.10
Jan00 $0.03

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Nvidia Corporation Quarterly Valuation – May 2015 $NVDA
58 Companies in the Spotlight This Week – 1/31/15
Nvidia Corporation Quarterly Valuation – January 2015 $NVDA
18 Companies in the Spotlight This Week – 10/25/14

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Agilent Technologies Inc. Analysis – July 2015 Update $A
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Linear Technology Corporation Analysis – July 2015 Update $LLTC
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.

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Nvidia Corporation Quarterly Valuation – May 2015 $NVDA

197px-Nvidia_logo.svgNvidia Corporation (NVDA) has had a bad week in terms of market price, as the company’s stock dropped 7% since May 7. Recently, analysts have focused on the company’s efforts in the 4G field and competition. These are all things to consider before investing in the company and are considerations that may attract investors.

That said, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to determine a potential investment’s merits. Here’s an updated look at how Nvidia Corporation fares in the ModernGraham valuation model.

This model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

NVDA Chart

NVDA data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – FAIL
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests, or be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $20.95
MG Value $21.85
MG Opinion Fairly Valued
Value Based on 3% Growth $11.49
Value Based on 0% Growth $6.74
Market Implied Growth Rate 8.96%
Net Current Asset Value (NCAV) $5.45
PEmg 26.43
Current Ratio 6.60
PB Ratio 2.61

Balance Sheet – April 2015

Current Assets $5,832,000,000
Current Liabilities $883,000,000
Total Debt $1,404,000,000
Total Assets $7,291,000,000
Intangible Assets $823,000,000
Total Liabilities $2,735,000,000
Outstanding Shares 568,000,000

Earnings Per Share

2016 (estimate) $0.49
2015 $1.12
2014 $0.74
2013 $0.90
2012 $0.94
2011 $0.43
2010 -$0.12
2009 -$0.05
2008 $1.31
2007 $0.77
2006 $0.55

Earnings Per Share – ModernGraham

2016 (estimate) $0.79
2015 $0.90
2014 $0.72
2013 $0.62
2012 $0.48
2011 $0.33

Dividend History

NVDA Dividend Chart

NVDA Dividend data by YCharts

Conclusion

Nvidia should satisfy the Enterprising Investor but not the Defensive Investor. The Defensive Investor has multiple concerns, including the short dividend history, the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns. Therefore, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $0.48 in 2012 to an estimated $0.79 for 2016. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 8.96% over the next 7-10 years.

The company’s recent earnings history shows an average annual growth in EPSmg of nearly 13%. The ModernGraham valuation model reduces such a rate to a more conservative figure, assuming some slowdown will occur, but still returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating Nvidia is fairly valued at the present time.

Disclaimer: The author did not hold a position in any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logos taken from either the company website or Wikipedia; this article is not affiliated with the companies in any manner.

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Nvidia Corporation Quarterly Valuation – January 2015 $NVDA

197px-Nvidia_logo.svg

Nvidia should attract all Enterprising Investors with its strong financial condition as it passes all of the investor type’s requirements. The Defensive Investor should not be so keen on the company due to its insufficient level of earnings growth or stability over the last ten years, short dividend history, and high PEmg and PB ratios. As a result, only Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

The company has grown its EPSmg (normalized earnings) from $0.33 in 2011 to an estimated $0.87 for 2015. This level of demonstrated growth is fairly strong, and outpaces the market’s implied estimate of 6.79%. Based on the demonstrated growth, and lessened by a margin of safety, the ModernGraham valuation model estimates growth over the next 7-10 years to be very high. As a result, the company appears to be significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Nvidia Corporation (NVDA) for greater perspective!

Read the full valuation on Seeking Alpha!

NVDA Chart

NVDA data by YCharts

Disclaimer:  The author did not hold a position in Nvidia Corporation (NVDA) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Nvidia Corporation Quarterly Valuation – October 2014 $NVDA

197px-Nvidia_logo.svgNvidia should attract all Enterprising Investors with its strong financial condition as it passes all of the investor type’s requirements. The Defensive Investor should not be so keen on the company due to its insufficient level of earnings growth or stability over the last ten years, short dividend history, and high PEmg ratio. As a result, only Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

The company has grown its EPSmg (normalized earnings) from $0.33 in 2011 to an estimated $0.84 for 2015. This level of demonstrated growth is fairly strong, and outpaces the market’s implied estimate of 6.10%. Based on the demonstrated growth, and lessened by a margin of safety, the ModernGraham valuation model estimates growth over the next 7-10 years to be very high. As a result, the company appears to be significantly undervalued at the present time.

Read the full valuation on Seeking Alpha!

NVDA Chart

NVDA data by YCharts

Ametek Inc Valuation – March 2019 #AME

Company Profile (excerpt from Reuters): AMETEK, Inc., incorporated on May 8, 1986, is a manufacturer of electronic instruments and electromechanical devices with operations in North America, Europe, Asia and South America. The Company operates through two segments: Electronic Instruments (EIG) and Electromechanical (EMG). EIG designs and manufactures instruments for the process, power and industrial and aerospace markets. EMG is a differentiated supplier of precision motion control solutions, thermal management systems, specialty metals and electrical interconnects. Its end markets include aerospace and defense, medical, automation, mass transit, petrochemical and other industrial markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AME – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,072,893,170 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.46 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 121.55% Pass
6. Moderate PEmg Ratio PEmg < 20 24.35 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.34 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 1.46 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.94 Fail
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

EPSmg $3.27
MG Growth Estimate 7.03%
MG Value $73.71
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $47.38
MG Value based on 0% Growth $27.77
Market Implied Growth Rate 7.93%
Current Price $79.57
% of Intrinsic Value 107.95%

AMETEK, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.22 in 2015 to an estimated $3.27 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 7.93% 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 AMETEK, Inc. revealed the company was trading above its Graham Number of $40.56. The company pays a dividend of $0.56 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 24.35, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.17.

AMETEK, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.17
Graham Number $40.56
PEmg 24.35
Current Ratio 1.46
PB Ratio 4.34
Current Dividend $0.56
Dividend Yield 0.70%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,836,144,000
Total Current Liabilities $1,258,704,000
Long-Term Debt $2,273,837,000
Total Assets $8,662,288,000
Intangible Assets $6,015,804,000
Total Liabilities $4,420,366,000
Shares Outstanding (Diluted Average) 231,335,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.00
Dec2018 $3.34
Dec2017 $2.94
Dec2016 $2.19
Dec2015 $2.45
Dec2014 $2.37
Dec2013 $2.10
Dec2012 $1.88
Dec2011 $1.58
Dec2010 $1.18
Dec2009 $0.85
Dec2008 $1.02
Dec2007 $0.94
Dec2006 $0.76
Dec2005 $0.57
Dec2004 $0.47
Dec2003 $0.37
Dec2002 $0.37
Dec2001 $0.29
Dec2000 $0.31
Dec1999 $0.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.27
Dec2018 $2.82
Dec2017 $2.51
Dec2016 $2.26
Dec2015 $2.22
Dec2014 $2.02
Dec2013 $1.73
Dec2012 $1.47
Dec2011 $1.21
Dec2010 $1.00
Dec2009 $0.88
Dec2008 $0.85
Dec2007 $0.72
Dec2006 $0.57
Dec2005 $0.46
Dec2004 $0.39
Dec2003 $0.34

Recommended Reading:

Other ModernGraham posts about the company

Ametek Inc Valuation – April 2018 $AME
AMETEK Inc Valuation – December 2016 $AME
Ametek Inc Valuation – August 2016 $AME
5 Undervalued Stocks Near Lows for Enterprising Value Investors – Aug 2016
5 Companies for Enterprising Investors Near 52 Week Lows – June 2016

Other ModernGraham posts about related companies

Advanced Micro Devices Inc Valuation – February 2019 $AMD
Qorvo Inc Valuation – February 2019 $QRVO
FLIR Systems Inc Valuation – February 2019 $FLIR
NetApp Inc Valuation – February 2019 $NTAP
Applied Materials Inc Valuation – February 2019 $AMAT
Microchip Technology Inc Valuation – February 2019 $MCHP
Broadcom Inc Valuation – February 2019 $AVGO
KLA-Tencor Corp Valuation – January 2019 $KLAC
TE Connectivity Ltd Valuation – January 2019 $TEL
NVIDIA Corp Valuation – January 2019 $NVDA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Advanced Micro Devices Inc Valuation – February 2019 $AMD

Company Profile (excerpt from Reuters): Advanced Micro Devices, Inc. (AMD), incorporated on May 1, 1969, is a global semiconductor company. The Company is engaged in offering x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs) and professional graphics, and, server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The Company’s segments include the Computing and Graphics segment, and the Enterprise, Embedded and Semi-Custom segment. The Computing and Graphics segment primarily includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. The Enterprise, Embedded and Semi-Custom segment primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of its intellectual property portfolio. The Company sells its products through its direct sales force and through independent distributors and sales representatives in both domestic and international markets. Its microprocessor customers consist primarily of original equipment manufacturers (OEMs), original design manufacturers (ODMs), system builders and independent distributors in both domestic and international markets.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMD – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,489,084,253 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.78 Fail
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 -333.33% Fail
6. Moderate PEmg Ratio PEmg < 20 304.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 20.82 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 1.78 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.72 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.08
MG Growth Estimate 15.00%
MG Value $3.08
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.16
MG Value based on 0% Growth $0.68
Market Implied Growth Rate 148.00%
Current Price $24.36
% of Intrinsic Value 790.91%

Advanced Micro Devices, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.61 in 2015 to an estimated $0.08 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 148% 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 below the price.

At the time of valuation, further research into Advanced Micro Devices, Inc. revealed the company was trading above its Graham Number of $3.42. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 304.5, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.23.

Advanced Micro Devices, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.23
Graham Number $3.42
PEmg 304.50
Current Ratio 1.78
PB Ratio 20.82
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,540,000,000
Total Current Liabilities $1,984,000,000
Long-Term Debt $1,114,000,000
Total Assets $4,556,000,000
Intangible Assets $515,000,000
Total Liabilities $3,290,000,000
Shares Outstanding (Diluted Average) 1,082,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.41
Dec2018 $0.32
Dec2017 -$0.03
Dec2016 -$0.60
Dec2015 -$0.84
Dec2014 -$0.53
Dec2013 -$0.11
Dec2012 -$1.60
Dec2011 $0.66
Dec2010 $0.64
Dec2009 $0.45
Dec2008 -$5.15
Dec2007 -$6.06
Dec2006 -$0.34
Dec2005 $0.40
Dec2004 $0.25
Dec2003 -$0.79
Dec2002 -$3.81
Dec2001 -$0.18
Dec2000 $2.89
Dec1999 -$0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.08
Dec2018 -$0.17
Dec2017 -$0.42
Dec2016 -$0.65
Dec2015 -$0.61
Dec2014 -$0.40
Dec2013 -$0.22
Dec2012 -$0.51
Dec2011 -$0.61
Dec2010 -$1.53
Dec2009 -$2.45
Dec2008 -$3.33
Dec2007 -$2.05
Dec2006 -$0.32
Dec2005 -$0.48
Dec2004 -$0.72
Dec2003 -$0.95

Recommended Reading:

Other ModernGraham posts about the company

Advanced Micro Devices Inc Valuation – May 2018 $AMD
Advanced Micro Devices Inc Valuation – January 2017 $AMD
Advanced Micro Devices Inc. Analysis – Initial Coverage $AMD
Valuation: Advanced Micro Devices (AMD)

Other ModernGraham posts about related companies

Qorvo Inc Valuation – February 2019 $QRVO
FLIR Systems Inc Valuation – February 2019 $FLIR
NetApp Inc Valuation – February 2019 $NTAP
Applied Materials Inc Valuation – February 2019 $AMAT
Microchip Technology Inc Valuation – February 2019 $MCHP
Broadcom Inc Valuation – February 2019 $AVGO
KLA-Tencor Corp Valuation – January 2019 $KLAC
TE Connectivity Ltd Valuation – January 2019 $TEL
NVIDIA Corp Valuation – January 2019 $NVDA
Seagate Technology PLC Valuation – January 2019 $STX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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