Loading...

NVIDIA

Nasdaq:NVDA
Snowflake Description

Outstanding track record with adequate balance sheet.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
NVDA
Nasdaq
$61B
Market Cap
Semiconductors
Company description

NVIDIA Corporation operates as a visual computing company worldwide. More info.


Add to Portfolio Compare Print Invest
SHARE PRICE
3 Month History
NVDA
Industry
5yr Volatility vs Market

Value

 Is NVIDIA undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of NVIDIA to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of NVIDIA is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for NVIDIA's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are NVIDIA's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Overvalued based on earnings compared to the Semiconductors industry average.
  • Overvalued based on earnings compared to the overall market.
Price based on expected Growth
Does NVIDIA's expected growth come at a high price?
  • No forecast or negative expected growth next year.
Price based on value of assets
What value do investors place on NVIDIA's assets?
  • Overvalued based on assets compared to the Semiconductors industry average.
X
Value checks
We assess NVIDIA's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Semiconductors industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Semiconductors industry average (and greater than 0)? (1 check)
  5. NVIDIA has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (-8.56%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Free cash flow to Equity)

The calculations below outline how an intrinsic value for NVIDIA is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$8,565

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $3,047 × (1 + 2.5%) ÷ (8.88% – 2.5%)

Terminal value based on the Perpetuity Method where growth (g) = 2.5%:
$48,740

Present value of terminal value:
$31,858

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value

Value = Total value / Shares Outstanding ($40,423 / 595)

Value per share:
$67.99

Current discount (share price of $102.95): -51%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.88% = 2.47% + (0.851 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.851 = 0.824 (1 + (1- 30%) (4.56%))

Levered Beta used in calculation = 0.851



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in US.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is NVIDIA expected to perform in the next 1 to 3 years based on estimates from 31 analysts?

    The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

    Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
    3 year growth
    47%
    Expected earnings growth over 3 years.
    Future Earnings growth analysis
    Is NVIDIA expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.

    Are NVIDIA's annual earnings growth expected to exceed 3.6% over the next 3 years?

    • Earnings are expected to decrease over the next year.
    • After 3 years
    1 & 3 year estimated growth in earnings
    Past and Future Earnings per Share
    The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
    Analysts growth expectations
    2 year growth check
    Super high growth metrics x1.5?

    Which of the these is expected to increase by over 50% in 2 year's time?

    • Revenue
    • Cash flow
    • Profit
    Performance in 3 years
    In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
    • NVIDIA is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

    Improvement & Relative to industry
    • Expected to be above the Semiconductors industry average.
    • A decline in NVIDIA's performance (ROE) is expected over the next 3 years.
    X
    Future performance checks
    We assess NVIDIA's future performance by looking at:
    1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
    2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
    3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
    4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
    5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
    Some of the above checks will fail if the company is expected to be loss making in the relevant year.
    NVIDIA has a total score of 2/6, see the detailed checks below.

    Note: If no +3 year data is available, +2.5 year data may be used.

    Note 2: We use GAAP per Share in all our calculations.

    Full details on the Future part of the Simply Wall St company analysis model.

    Past Performance

     How has NVIDIA performed over the past 5 years?

    The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
    Past earnings growth
    Below we compare NVIDIA's growth in the last year to its industry (Semiconductors).
    Past Earnings growth analysis
    We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
    • NVIDIA's earnings growth has exceeded the industry average over the past year.
    • NVIDIA's 1 year earnings growth exceeds its 5 year annual average (172.5% vs 20.2%).
    • NVIDIA has delivered strong earnings growth in the past 5 years.
    Profit History
    NVIDIA's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
    Performance last year
    We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
    • Strong return on shareholders funds (ROE) last year.
    • NVIDIA performed above the Semiconductors industry average based on return on assets (ROA) last year.
    • Performance based on revenue producing assets (ROCE) is broadly the same over 3 years.
    X
    Past performance checks
    We assess NVIDIA's performance over the past 5 years by checking for:
    1. Has earnings per share (EPS) increased in past 5 years? (1 check)
    2. Has the EPS growth in the last year exceeded that of the Semiconductors industry? (1 check)
    3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
    4. Is the Return on Equity (ROE) higher than 20%? (1 check)
    5. Is the Return on Assets (ROA) above industry average? (1 check)
    6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
    The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
    NVIDIA has a total score of 6/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations.

    Full details on the Past part of the Simply Wall St company analysis model.

    Health

     How is NVIDIA's financial health and their level of debt?

    A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

    The boxes below represent the relative size of what makes up NVIDIA's finances.

    The net worth of a company is the difference between its assets and liabilities.
    Net Worth
    • NVIDIA is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
    • NVIDIA's cash and other short term assets cover its long term commitments.
    Balance sheet
    This treemap shows a more detailed breakdown of NVIDIA's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
    Assets
    Liabilities and shares
    The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
    • Low level of unsold assets
    • Total debt is covered by short term assets.
    Historical Debt
    Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

    The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

    If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
    • The level of debt (48%) compared to net worth is high (greater 40%).
    • The level of debt compared to net worth has increased over the past 5 years (1% vs 48% today).
    • Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
    • Interest on debt is well covered by earnings (415.5x coverage).
    X
    Financial health checks
    We assess NVIDIA's financial health by checking for:
    1. Are short term assets greater than short term liabilities? (1 check)
    2. Are short term assets greater than long term liabilities? (1 check)
    3. Has the debt to equity ratio increased in the past 5 years? (1 check)
    4. Is the debt to equity ratio over 40%? (1 check)
    5. Is the debt covered by short term assets? (1 check)
    6. Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
    7. NVIDIA has a total score of 4/6, see the detailed checks below.


    Full details on the Health part of the Simply Wall St company analysis model.

    Dividends

     What is NVIDIA's current dividend yield, its reliability and sustainability?

    Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
    Annual Dividend Income
    Dividend payments
    0.56%
    Current annual income from NVIDIA dividends. Estimated to be 0.58% next year.
    If you bought $2,000 of NVIDIA shares you are expected to receive $11 in your first year as a dividend.
    Dividend Amount
    Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
    • Paying below low risk savings rate. (1.75%)
    • Paying below the markets top dividend payers. (3.18%)
    Historical dividend yield
    It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

    We also check to see if the dividend has increased in the past 10 years.
    • Whilst dividend payments have been stable, NVIDIA has been paying a dividend for less than 10 years.
    • Dividend payments have increased, but NVIDIA only paid a dividend in the past 4 years.
    Current Payout to shareholders
    What portion of NVIDIA's earnings are paid to the shareholders as a dividend.
    • Dividends paid are well covered by net profit (6.3x coverage).
    Future Payout to shareholders
    • Dividends after 3 years are expected to be thoroughly covered by net profit (7.1x coverage).
    X
    Income/ dividend checks
    We assess NVIDIA's dividend by checking for:
    1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
    2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
    3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
    4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
    5. How sustainable is the dividend, can NVIDIA afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
    6. NVIDIA has a total score of 2/6, see the detailed checks below.


    Full details on the Dividends part of the Simply Wall St company analysis model.

    Management

     What is the CEO of NVIDIA's salary, the management and board of directors tenure and is there insider trading?

    Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
    CEO
    Jensen  Huang, image provided by Google.
    Jensen Huang
    COMPENSATION$12,194,238
    AGE54
    CEO Bio

    Mr. Jensen Hsun Huang founded NVIDIA Ltd. in 1993 and has been its Chief Executive Officer and President since 1993. Mr. Huang co-founded NVIDIA Corporation in April 1993 and has been its Chief Executive Officer and President since April 1993. Mr. Huang served as an Advisor at IT-Farm Corporation. Under his leadership, NVIDIA has become the world leader in programmable graphics processing technologies and one of the semiconductor industry's largest fabless companies. Mr. Huang served as a Trustee of The RAND Corporation since 1999. From 1985 to 1993, he was employed at LSI Logic Corporation where he held a variety of positions. From 1984 to 1985, Mr. Huang served as a Microprocessor Designer for Advanced Micro Devices, Inc. He has been a Director of NVIDIA Corporation and NVIDIA Ltd. since April 1993. He served as Director of The RAND Corporation and Coreware. He serves as a Director of Semiconductor Industry Association. He is also a Member of the Committee of 100. In 2004, the Fabless Semiconductor Association honored him with the prestigious Mr. Morris Chang Exemplary Leadership Award. Mr. Huang is often invited to speak on technology and business trends at industry events. He holds an M.S. in Electrical Engineering degree from Stanford University and a B.S. in Electrical Engineering degree from Oregon State University.

    CEO Compensation
    • CEO's compensation has been consistent with company performance over the past year.
    • CEO's compensation appears reasonable.
    Management Team Tenure

    Average tenure of the NVIDIA management team:

    Management tenure
    10.6 years
    • The average tenure for the NVIDIA management team is over 5 years, this suggests they are a seasoned and experienced team.
    Management Team

    Jensen Huang

    TITLE
    Co-Founder
    COMPENSATION
    $12,194,238
    AGE
    54

    Colette Kress

    TITLE
    Chief Financial Officer and Executive Vice President
    COMPENSATION
    $4,623,665
    AGE
    50

    Deborah Shoquist

    TITLE
    Executive Vice President of Operations
    COMPENSATION
    $3,283,325
    AGE
    62

    Jay Puri

    TITLE
    Executive Vice President of Worldwide Field Operations
    COMPENSATION
    $5,278,986
    AGE
    62

    Chris Malachowsky

    TITLE
    Co-Founder
    COMPENSATION
    $320,000

    Michael Byron

    TITLE
    Chief Accounting Officer and Vice President of Finance
    AGE
    51
    Board of Directors Tenure

    Average tenure of the NVIDIA board of directors:

    Board tenure
    19 years
    • The average tenure for the NVIDIA board of directors is over 10 years, this suggests they are a seasoned and experienced board.
    Board of Directors

    Jensen Huang

    TITLE
    Co-Founder
    COMPENSATION
    $12,194,238
    AGE
    54

    Bill Miller

    TITLE
    Lead Director
    COMPENSATION
    $342,718
    AGE
    71

    Mark Perry

    TITLE
    Independent Director
    COMPENSATION
    $342,718
    AGE
    61

    Rob Burgess

    TITLE
    Independent Director
    COMPENSATION
    $342,718
    AGE
    59

    Mark Stevens

    TITLE
    Independent Director
    COMPENSATION
    $342,718
    AGE
    57

    Jim Gaither

    TITLE
    Independent Director
    COMPENSATION
    $342,718
    AGE
    79
    Recent Insider Trading
    • No insider transactions in the past 3 months.
    Who owns this company?
    X
    Management checks
    We assess NVIDIA's management by checking for:
    1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
    2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
    3. Is the average tenure of the management team less than 2 years? (1 check)
    4. Is the average tenure of the board of directors team less than 3 years? (1 check)
    5. NVIDIA has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


    Note: We use the top 6 management executives and board members in our calculations.

    Note 2: Insider trading include any internal stakeholders and these transactions.

    Full details on the Management part of the Simply Wall St company analysis model.

    Company News

    Articles
    Announcements

    Company Info

    Description

    NVIDIA Corporation operates as a visual computing company worldwide. It operates in two segments, GPU and Tegra Processor. The GPU segment offers processors, which include GeForce for PC gaming; GeForce NOW for cloud-based game-streaming service; Quadro for design professionals working in computer-aided design, video editing, special effects, and other creative applications; Tesla for deep learning, accelerated computing, and general purpose computing; and GRID for cloud-based visual computing users. The Tegra Processor segment provides processors that integrate a computer onto a single chip under the Tegra brand name; DRIVE automotive computers, which offer self-driving capabilities; and tablet and portable devices for mobile gaming and TV streaming under the SHIELD name. The company’s products are used in gaming, professional visualization, datacenter, and automotive markets. It sells its products primarily to original equipment manufacturers, original device manufacturers, system builders, motherboard manufacturers, add-in board manufacturers, and retailers/distributors. NVIDIA Corporation was founded in 1993 and is headquartered in Santa Clara, California.

    Details
    Name:NVIDIA Corporation
    Ticker:NVDA
    Exchange:NasdaqGS
    Founded:1993
    Market Cap:$61,208 million
    Website:http://www.nvidia.com
    Listings
    Map

    2701 San Tomas Expressway, Santa Clara, 95050, United States

    Number of employees
    Street

    Current staff
    Staff numbers
    10,299
    NVIDIA employees.
    Industry
    Industry:Semiconductors
    Sector:Semiconductors and Semiconductor Equipment