NVIDIA Corporation (NVDA) Valuation Report

Intrinsic Value
$508B

Value Per Share
$204 -74%

Price Target
$255 -67%

Market Cap
$1.9T

Enterprise Value
$1.9T

Price
$774.99 -1.55%

Dividend Yield
0.0%

Adjusted Yield
0.4%

TTM Growth Margin Ratio Yield
Revenue $61B 125.9% 31.5x
Gross $44B 188.5% 72.7% 43.4x
EBITDA $34B 369.6% 56.6% 55.7x
EBIT $33B 680.4% 54.1% 58.3x 1.7%
Profit $30B 581.3% 48.8% 65.1x 1.5%
FCFF $22B 3044.8% 36.1% 87.3x 1.1%
FCFE $24B 3509.9% 44.3% 79.2x 1.3%
Cost of Equity = 11.4% | Cost of Capital = 11.4%Currency: USD | Updated:
Sector: Technology | Industry: Semiconductors | Read more...

NVIDIA Corporation provides graphics, and compute and networking solutions in the United States, Taiwan, China, and internationally.
The company's Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building 3D designs and virtual worlds.
Its Compute & Networking segment provides Data Center platforms and systems for AI, HPC, and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; cryptocurrency mining processors; Jetson for robotics and other embedded platforms; and NVIDIA AI Enterprise and other software.
The company's products are used in gaming, professional visualization, datacenter, and automotive markets.
NVIDIA Corporation sells its products to original equipment manufacturers, original device manufacturers, system builders, add-in board manufacturers, retailers/distributors, independent software vendors, Internet and cloud service providers, automotive manufacturers and tier-1 automotive suppliers, mapping companies, start-ups, and other ecosystem participants.
It has a strategic collaboration with Kroger Co.
NVIDIA Corporation was incorporated in 1993 and is headquartered in Santa Clara, California..

Full-time employees: 29,600 | HQ: Santa Clara
Website: https://www.nvidia.com

Valuation

Input

➜ Revenue Growth

➜ EBIT Margins

➜ Reinvstment Efficiency

➜ Cost of Capital

➜ Tax

NVDA Valuation Output

Terminal value

$675B

+ PV Terminal Value

$248B

+ PV FCFF

$244B

= Sum of PV

$492B

+ Cash

$26B

- Debt

$9.9B

= Intrinsic Value

$508B

Value Per Share

$204

Overvalued by 74% vs its $775 Price

1-Year Price Target

$255 (-67%)

10-Year Fundamental Projections for NVIDIA Corporation (NVDA)
YearGrowthSalesEBIT %EBITTaxNOPATReinvestmentROICFCFFWACCPV FCFF
TTM 10.1% $61B 54.1% $33B 9% $30B $3.4B 111% $22B 11.4% --
2025 10.1% $67B 54.1% $36B 9% $33B $2.7B 112% $30B 11.4% $27B
2026 10.1% $74B 54.1% $40B 9% $36B $2.9B 112% $33B 11.4% $27B
2027 10.1% $81B 54.1% $44B 9% $40B $3.2B 112% $37B 11.4% $27B
2028 10.1% $90B 54.1% $48B 9% $44B $3.6B 112% $41B 11.4% $26B
2029 10.1% $99B 54.1% $53B 9% $49B $3.9B 112% $45B 11.4% $26B
2030 8.9% $107B 54.1% $58B 12% $51B $4.9B 106% $46B 10.8% $24B
2031 7.8% $116B 54.1% $63B 14% $54B $4.6B 102% $49B 10.2% $23B
2032 6.6% $123B 54.1% $67B 17% $55B $4.2B 97% $51B 9.7% $22B
2033 5.4% $130B 54.1% $70B 20% $57B $3.7B 93% $53B 9.1% $21B
2034 4.3% $136B 54.1% $73B 22% $57B $3.1B 89% $54B 8.5% $20B
♾️ 4.3% $141B 54.1% $77B 25% $57B $29B 8.5% $28B 8.5% --
How is NVDA's expected return calculated?

The expected return is a percent (%) estimate of how much a stock's value will change per year. It is used to calculate NVDA's 1-year price target by multiplying the stock's present value with (1 + expected return). The expected return is calculated using a stock's risk (cost of capital), excess returns, and dividend yield.

Expected Return = (1 + Cost of Capital) * (Cost of Capital * (1 + ROIC - Cost of Capital - Dividend Yield))
24.9% = 111.4% * (11.4% * 195.9%)

We exclude dividend payments because they aren't reflected in a stock's price. Note that excess returns are highly dependant on our estimate of invested capital and its return. Neglecting to capitalize expense items such as operating leases, R&D, brand name marketing expenses, may inflate the excess return estimate.

Growth

In the 12 months ending Q4'24 NVIDIA Corporation (NVDA) grew revenues by 125.9%, from $27B to $61B - indicating an acceleration of revenue growth. NVDA has a 5-year and 3-year revenue compound annual growth rate (CAGR) of 41.0% and 31.3% respectively.

Revenue Growth Estimates

Sustainable
2.1%
Fundamental
-2.1%
Priced-in
-5.3%

Bottom Line Growth Estimates

Fundamental Earnings Growth
0.0%
Fundamental EBIT Growth
4.0%
Priced-in FCFF Growth
10.1%

Looking at forward estimates, we can see that the market is pricing-in a -5.3% long-term revenue growth rate, while the financials indicate a future revenue growth rate between 2.1% and -2.1%.

Using the average of these 3 estimates we get a -1.8% long-term revenue growth for NVDA.

What is NVDA's sustainable revenue growth?

Similar to fixed vs variable costs, the sustainable growth rate shows how much we can expect the company to grow based on their reinvestment into the business, excluding variable demand and pricing. This rate may be helpful as a long-term baseline for the company.

(NVDA) has invested $27B in total capital, consisting of $43B in book value of equity, plus $9.9B in total debt, less $26B in cash & equivalents.
By adding on the average reinvestment of $1.1B in the last 4 quarters on a TTM basis to the $27B capital base, and applying the current sales to capital ratio of 226.2%, we can expect the company to grow its revenue to $63B, implying growth of 4.2%. However, we assume at least one gap year for CapEx to transform into growth, so we divide the rate by 2 and get a 2.1% sustainable revenue growth.
Use your own judgement based on the type of business since it takes time for reinvestment to yield growth.

What are NVDA's fundamental revenue & EBIT growth rates?

The fundamental growth rates analyze how much (NVDA) is reinvesting into the business, adjusted for the quality of those reinvestments to come up with an estimate for a long-term future growth. Both fundamental and sustainable gorwt rate estimates attempt to use fundamentals in estimating growth.

NVIDIA Corporation (NVDA) has reinvested an average of $1.1B on a rolling TTM basis, reflecting a reinvestment rate of 3.7%, calculated as:
Reinvestment / (EBIT - Tax) a.k.a. NOPAT.
By multiplying the reinvestment rate with the return on invested capital (ROIC) we get a long-term estimate for a growth in EBIT:
3.7% * 107.4% = 4.0% (Reinvestment rate * ROIC)

In order to convert this to a fundamental revenue growth rate, we analyze the relationship between EBIT growth and Revenue growth, and come up with a scaling factor of -52.6%. We then multiply the fundamental EBIT growth estimate by the revenue scaling factor and get an equivalent for a fundamental revenue growth rate of -2.1%.

What FCFF & revenue growth rates is the market pricing-in for NVDA?

In order to justify the current $1.9T market capitalization given a 11.4% cost of capital, NVDA needs to keep growing its un-levered free cash flows by 10.1% across many ( >10 ) years.

NVDA's market implied FCFF growth rate of 10.1% =
1 + (Enterprise Value * Cost of Capital - FCFF) / (Enterprise Value + FCFF) =
1 + ($1.9T * 11.4% - $22B) / ($1.9T + $22B)

By analyzing the relationship between EBIT growth and revenue growth, we get a scaling factor of -52.6% that we apply to our implied FCFF growth in order to get the market implied revenue growth rate of -5.3%

Margins

Gross
72.7%
27.7% YoY
EBIT
54.1%
245.5% YoY
Profit
48.8%
201.7% YoY
FCFF
36.1%
1403.9% YoY
Why is NVDA scaling revenues by 82.8% relative to COGS?

NVDA grew revenue by 125.9% in the last 12 months, and their COGS changed by 43.1% in the same period. This means that the company is scaling revenues 82.8% better than costs.

A company that has a scaling rate above 1:1 indicates efficient growth that may translate into added value in the bottom line. Conversely, if the rate is lower, e.g. 1:0.9, it shows that while the company managed to grow, their costs increased more than revenues.

Free Cash Flows

Reinvestment
-$3.4B
FCFF
$22B
FCFE
$24B
Net CapEx
$356M
Simple FCFF
$27B
Change in WC
-$3.7B

Note: cash flows in the table and chart are presented as inflows and outflows, meaning that positive numbers indicate how much a company has taken in, and negatives show how much cash has flown out.

What is included in NVDA's $1.2B capital expenditures?

In the last 12 months NVDA invested $1.1B in plant property & equipment (PPE) CapEx. By adding the $83M in acquisition expenses, we get a total CapEx of $1.2B.

How much is NVDA reinvesting into the business?

In the last 12 months ending Q4'24, NVDA made capital expenditures of $1.2B. By netting out the depreciation of $1.5B, we get a NetCapEx of -$356M, indicating that the company invested less than it needs to, in order to sustain growth.

Finally, we add on the change in Working Capital of $3.7B, and get a Total Reinvestment of $3.4B.

By investing more than it depreciates, NVDA is increasing its future growth assets.

How are NVDA's $22B free cash flows to the firm (FCFF) calculated? NVDA's $21,998,000,000.00 Free Cash Flows to the Firm (FCFF) =
$32,972,000,000.00 EBIT
- $3,086,000,000.00 Tax
- $1,069,000,000.00 Plant Property Equipment
- $83,000,000.00 Acquisitions
+ $1,508,000,000.00 Depreciation
+ -$3,722,000,000.00 Change in Working Capital
- $3,549,000,000.00 Stock Based Compensation

Free Cash Flows to the Firm are important because they indicate how much a company has left over for all (debt & equity) investors.
It is a measure of the true bottom line for investors, as opposed to earnings and the simplified version of free cash flows (Cash from operating activities - PPE).

In the last 12 months NVDA had $22B in free cash flows, indicating that the business has managed to create value for investors.

How are NVDA's $24B free cash flows to equity investors (FCFE) calculated? NVDA's $24,475,000,000.00 Free Cash Flows to the Equity (FCFE) =
$29,759,000,000.00 Net Income
- $1,069,000,000.00 Plant Property Equipment
- $83,000,000.00 Acquisitions
+ $1,508,000,000.00 Depreciation
+ -$3,722,000,000.00 Change in Working Capital
+ $9,937,000,000.00 Total Debt today
- $11,855,000,000.00 Total Debt one year ago

Free Cash Flows to the Equity investors show how much the company has left over for shareholders.
It is an insightful metric when paired with FCFF for analyzing companies that have a lot of debt, as it can reveal the effect of interest rates on the value of equity.

When compared to FCFF, they should be roughly in-line, else we need to think about what causes the difference. In the last 12 months NVDA had $24B in free cash flows to equity, indicating that the business can return capital in the form of dividends and buybacks.

Returns

ROE
69.2%
ROIC
107.4%
Sales to Cap
226.2%
How much excess returns (value) is NVDA creating on average (77%), and how to calculate it?

ROE Excess Returns 57.8% = Return on Equity - Cost of Equity
ROC Excess Returns 96.0% = Return on Capital - Cost of Capital

Average Excess Returns = (ROE - Cost of Equity + ROIC - Cost of Capital) / 2

For every 1% of growth in its net and operating income, the value of NVDA's stock changes by an average of 0.77%.

Excess returns are important because they help us estimate a company's target price.

If you are analyzing a company with a lot of R&D expenses, consider capitalizing them as an asset to get a better ROE & ROC estimate - You can use our automated spreadsheet.

Capital Structure

Equity
$43B
Debt
$9.9B
Cash
$26B
Interest Coverage
128.3x
Debt to EBITDA
0.29x
Debt to Capital
0.5%

Dividends & Buybacks

Adj. Yield
0.4%
Dividends + Buybacks - SBC
FCFE Payout
28.1%
% FCFE paid as Div + Net Buybacks
R-R Upside
-95.0%
FCFE yld. / Cost of Equity - 1

NVIDIA Corporation has transferred a total value of $6.9B to investors in the last 12 months. The required cash return (excluding expected growth) for NVDA is $139B, or a 7.2% yield in the same period.

With an adjusted payout of 28.1%, NVDA seems to be spending an affordable portion of its FCFE.

SEC Filings

Examine the details and validate data:

Historical SEC Filings

Headlines