Intrinsic value of NVIDIA - NVDA

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$101.68

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$101.68

 
Intrinsic value

$1,597

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of NVDA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 59.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  37.92
  55.10
  50.09
  45.58
  41.52
  37.87
  34.58
  31.63
  28.96
  26.57
  24.41
  22.47
  20.72
  19.15
  17.73
  16.46
  15.32
  14.28
  13.36
  12.52
  11.77
  11.09
  10.48
  9.93
  9.44
  9.00
  8.60
  8.24
  7.91
  7.62
  7.36
Revenue, $m
  6,910
  10,717
  16,086
  23,418
  33,142
  45,692
  61,495
  80,942
  104,385
  132,117
  164,366
  201,297
  243,010
  289,546
  340,896
  397,012
  457,815
  523,207
  593,083
  667,336
  745,866
  828,590
  915,442
  1,006,379
  1,101,385
  1,200,468
  1,303,669
  1,411,052
  1,522,713
  1,638,774
  1,759,384
Variable operating expenses, $m
 
  3,985
  5,950
  8,634
  12,193
  16,788
  22,572
  29,691
  38,273
  48,424
  60,229
  73,686
  88,955
  105,990
  124,787
  145,329
  167,586
  191,523
  217,102
  244,282
  273,029
  303,311
  335,103
  368,392
  403,169
  439,439
  477,216
  516,525
  557,399
  599,884
  644,034
Fixed operating expenses, $m
 
  2,504
  2,567
  2,631
  2,697
  2,764
  2,833
  2,904
  2,977
  3,051
  3,127
  3,205
  3,286
  3,368
  3,452
  3,538
  3,627
  3,717
  3,810
  3,906
  4,003
  4,103
  4,206
  4,311
  4,419
  4,529
  4,642
  4,758
  4,877
  4,999
  5,124
Total operating expenses, $m
  4,976
  6,489
  8,517
  11,265
  14,890
  19,552
  25,405
  32,595
  41,250
  51,475
  63,356
  76,891
  92,241
  109,358
  128,239
  148,867
  171,213
  195,240
  220,912
  248,188
  277,032
  307,414
  339,309
  372,703
  407,588
  443,968
  481,858
  521,283
  562,276
  604,883
  649,158
Operating income, $m
  1,934
  4,228
  7,569
  12,153
  18,251
  26,141
  36,089
  48,347
  63,136
  80,642
  101,010
  124,406
  150,769
  180,188
  212,657
  248,145
  286,602
  327,967
  372,171
  419,148
  468,834
  521,176
  576,133
  633,677
  693,797
  756,500
  821,810
  889,769
  960,437
  1,033,891
  1,110,226
EBITDA, $m
  2,121
  4,436
  7,849
  12,533
  18,763
  26,823
  36,986
  49,508
  64,616
  82,498
  103,304
  127,140
  154,070
  184,121
  217,287
  253,537
  292,820
  335,073
  380,226
  428,211
  478,964
  532,430
  588,566
  647,345
  708,756
  772,805
  839,517
  908,934
  981,118
  1,056,149
  1,134,122
Interest expense (income), $m
  13
  71
  104
  179
  281
  415
  590
  809
  1,079
  1,404
  1,788
  2,236
  2,748
  3,326
  3,972
  4,684
  5,463
  6,306
  7,213
  8,182
  9,212
  10,301
  11,449
  12,653
  13,915
  15,233
  16,607
  18,038
  19,528
  21,077
  22,686
Earnings before tax, $m
  1,905
  4,158
  7,465
  11,974
  17,971
  25,725
  35,500
  47,538
  62,058
  79,238
  99,222
  122,170
  148,021
  176,862
  208,685
  243,461
  281,139
  321,661
  364,958
  410,965
  459,622
  510,875
  564,684
  621,023
  679,882
  741,267
  805,203
  871,730
  940,909
  1,012,814
  1,087,539
Tax expense, $m
  239
  1,123
  2,015
  3,233
  4,852
  6,946
  9,585
  12,835
  16,756
  21,394
  26,790
  32,986
  39,966
  47,753
  56,345
  65,734
  75,908
  86,848
  98,539
  110,961
  124,098
  137,936
  152,465
  167,676
  183,568
  200,142
  217,405
  235,367
  254,045
  273,460
  293,636
Net income, $m
  1,666
  3,035
  5,449
  8,741
  13,119
  18,779
  25,915
  34,703
  45,302
  57,844
  72,432
  89,184
  108,055
  129,109
  152,340
  177,726
  205,232
  234,812
  266,419
  300,005
  335,524
  372,939
  412,219
  453,347
  496,314
  541,125
  587,798
  636,363
  686,863
  739,354
  793,904

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,798
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  9,841
  4,719
  7,083
  10,312
  14,593
  20,120
  27,078
  35,642
  45,965
  58,176
  72,376
  88,638
  107,006
  127,497
  150,108
  174,818
  201,592
  230,386
  261,155
  293,851
  328,431
  364,857
  403,101
  443,144
  484,978
  528,608
  574,051
  621,335
  670,503
  721,609
  774,718
Adjusted assets (=assets-cash), $m
  3,043
  4,719
  7,083
  10,312
  14,593
  20,120
  27,078
  35,642
  45,965
  58,176
  72,376
  88,638
  107,006
  127,497
  150,108
  174,818
  201,592
  230,386
  261,155
  293,851
  328,431
  364,857
  403,101
  443,144
  484,978
  528,608
  574,051
  621,335
  670,503
  721,609
  774,718
Revenue / Adjusted assets
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
  2.271
Average production assets, $m
  629
  975
  1,464
  2,131
  3,016
  4,158
  5,596
  7,366
  9,499
  12,023
  14,957
  18,318
  22,114
  26,349
  31,022
  36,128
  41,661
  47,612
  53,971
  60,728
  67,874
  75,402
  83,305
  91,580
  100,226
  109,243
  118,634
  128,406
  138,567
  149,128
  160,104
Working capital, $m
  6,748
  1,157
  1,737
  2,529
  3,579
  4,935
  6,641
  8,742
  11,274
  14,269
  17,752
  21,740
  26,245
  31,271
  36,817
  42,877
  49,444
  56,506
  64,053
  72,072
  80,554
  89,488
  98,868
  108,689
  118,950
  129,651
  140,796
  152,394
  164,453
  176,988
  190,013
Total debt, $m
  2,816
  2,984
  5,112
  8,018
  11,871
  16,845
  23,107
  30,815
  40,105
  51,095
  63,876
  78,511
  95,042
  113,484
  133,834
  156,073
  180,170
  206,085
  233,777
  263,203
  294,325
  327,108
  361,528
  397,566
  435,217
  474,484
  515,382
  557,939
  602,190
  648,185
  695,983
Total liabilities, $m
  4,079
  4,247
  6,375
  9,281
  13,134
  18,108
  24,370
  32,078
  41,368
  52,358
  65,139
  79,774
  96,305
  114,747
  135,097
  157,336
  181,433
  207,348
  235,040
  264,466
  295,588
  328,371
  362,791
  398,829
  436,480
  475,747
  516,645
  559,202
  603,453
  649,448
  697,246
Total equity, $m
  5,762
  472
  708
  1,031
  1,459
  2,012
  2,708
  3,564
  4,596
  5,818
  7,238
  8,864
  10,701
  12,750
  15,011
  17,482
  20,159
  23,039
  26,116
  29,385
  32,843
  36,486
  40,310
  44,314
  48,498
  52,861
  57,405
  62,134
  67,050
  72,161
  77,472
Total liabilities and equity, $m
  9,841
  4,719
  7,083
  10,312
  14,593
  20,120
  27,078
  35,642
  45,964
  58,176
  72,377
  88,638
  107,006
  127,497
  150,108
  174,818
  201,592
  230,387
  261,156
  293,851
  328,431
  364,857
  403,101
  443,143
  484,978
  528,608
  574,050
  621,336
  670,503
  721,609
  774,718
Debt-to-equity ratio
  0.489
  6.320
  7.220
  7.780
  8.130
  8.370
  8.530
  8.650
  8.730
  8.780
  8.830
  8.860
  8.880
  8.900
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
Adjusted equity ratio
  -0.340
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,666
  3,035
  5,449
  8,741
  13,119
  18,779
  25,915
  34,703
  45,302
  57,844
  72,432
  89,184
  108,055
  129,109
  152,340
  177,726
  205,232
  234,812
  266,419
  300,005
  335,524
  372,939
  412,219
  453,347
  496,314
  541,125
  587,798
  636,363
  686,863
  739,354
  793,904
Depreciation, amort., depletion, $m
  187
  207
  280
  380
  512
  682
  897
  1,161
  1,480
  1,856
  2,294
  2,734
  3,301
  3,933
  4,630
  5,392
  6,218
  7,106
  8,055
  9,064
  10,130
  11,254
  12,434
  13,669
  14,959
  16,305
  17,707
  19,165
  20,682
  22,258
  23,896
Funds from operations, $m
  993
  3,242
  5,729
  9,121
  13,631
  19,462
  26,812
  35,864
  46,782
  59,700
  74,726
  91,918
  111,356
  133,042
  156,970
  183,119
  211,450
  241,919
  274,475
  309,069
  345,654
  384,192
  424,653
  467,016
  511,273
  557,430
  605,505
  655,528
  707,545
  761,612
  817,800
Change in working capital, $m
  -679
  411
  580
  792
  1,050
  1,355
  1,707
  2,100
  2,532
  2,995
  3,483
  3,989
  4,505
  5,026
  5,546
  6,061
  6,567
  7,062
  7,547
  8,019
  8,481
  8,934
  9,380
  9,821
  10,261
  10,701
  11,146
  11,597
  12,059
  12,535
  13,026
Cash from operations, $m
  1,672
  2,828
  5,150
  8,329
  12,580
  18,106
  25,105
  33,764
  44,250
  56,705
  71,243
  87,930
  106,851
  128,016
  151,424
  177,058
  204,883
  234,856
  266,928
  301,049
  337,173
  375,258
  415,273
  457,194
  501,012
  546,729
  594,359
  643,931
  695,486
  749,078
  804,774
Maintenance CAPEX, $m
  0
  -94
  -146
  -218
  -318
  -450
  -621
  -835
  -1,099
  -1,418
  -1,794
  -2,232
  -2,734
  -3,301
  -3,933
  -4,630
  -5,392
  -6,218
  -7,106
  -8,055
  -9,064
  -10,130
  -11,254
  -12,434
  -13,669
  -14,959
  -16,305
  -17,707
  -19,165
  -20,682
  -22,258
New CAPEX, $m
  -176
  -347
  -489
  -667
  -885
  -1,142
  -1,438
  -1,770
  -2,133
  -2,524
  -2,935
  -3,361
  -3,796
  -4,235
  -4,673
  -5,107
  -5,533
  -5,951
  -6,359
  -6,757
  -7,146
  -7,528
  -7,904
  -8,275
  -8,646
  -9,017
  -9,391
  -9,772
  -10,161
  -10,562
  -10,976
Cash from investing activities, $m
  -793
  -441
  -635
  -885
  -1,203
  -1,592
  -2,059
  -2,605
  -3,232
  -3,942
  -4,729
  -5,593
  -6,530
  -7,536
  -8,606
  -9,737
  -10,925
  -12,169
  -13,465
  -14,812
  -16,210
  -17,658
  -19,158
  -20,709
  -22,315
  -23,976
  -25,696
  -27,479
  -29,326
  -31,244
  -33,234
Free cash flow, $m
  879
  2,387
  4,516
  7,443
  11,378
  16,514
  23,047
  31,159
  41,017
  52,764
  66,514
  82,336
  100,321
  120,480
  142,819
  167,321
  193,958
  222,687
  253,463
  286,237
  320,963
  357,600
  396,115
  436,485
  478,698
  522,753
  568,663
  616,452
  666,159
  717,834
  771,540
Issuance/(repayment) of debt, $m
  1,315
  964
  2,127
  2,906
  3,854
  4,974
  6,262
  7,707
  9,291
  10,990
  12,780
  14,636
  16,531
  18,442
  20,350
  22,239
  24,096
  25,915
  27,692
  29,426
  31,122
  32,784
  34,420
  36,039
  37,651
  39,267
  40,898
  42,556
  44,251
  45,995
  47,798
Issuance/(repurchase) of shares, $m
  -748
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  552
  964
  2,127
  2,906
  3,854
  4,974
  6,262
  7,707
  9,291
  10,990
  12,780
  14,636
  16,531
  18,442
  20,350
  22,239
  24,096
  25,915
  27,692
  29,426
  31,122
  32,784
  34,420
  36,039
  37,651
  39,267
  40,898
  42,556
  44,251
  45,995
  47,798
Total cash flow (excl. dividends), $m
  1,431
  3,351
  6,643
  10,349
  15,231
  21,488
  29,309
  38,866
  50,308
  63,754
  79,294
  96,972
  116,852
  138,923
  163,169
  189,560
  218,054
  248,602
  281,155
  315,663
  352,085
  390,384
  430,535
  472,524
  516,349
  562,020
  609,561
  659,009
  710,411
  763,829
  819,338
Retained Cash Flow (-), $m
  -1,293
  -712
  -236
  -323
  -428
  -553
  -696
  -856
  -1,032
  -1,221
  -1,420
  -1,626
  -1,837
  -2,049
  -2,261
  -2,471
  -2,677
  -2,879
  -3,077
  -3,270
  -3,458
  -3,643
  -3,824
  -4,004
  -4,183
  -4,363
  -4,544
  -4,728
  -4,917
  -5,111
  -5,311
Prev. year cash balance distribution, $m
 
  6,002
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  8,642
  6,407
  10,026
  14,803
  20,935
  28,613
  38,010
  49,275
  62,533
  77,874
  95,346
  115,015
  136,873
  160,908
  187,089
  215,377
  245,723
  278,078
  312,394
  348,627
  386,741
  426,710
  468,520
  512,166
  557,657
  605,017
  654,280
  705,494
  758,719
  814,027
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  8,285
  5,865
  8,725
  12,189
  16,227
  20,766
  25,679
  30,798
  35,922
  40,827
  45,278
  49,081
  52,042
  54,020
  54,926
  54,732
  53,465
  51,211
  48,100
  44,300
  40,002
  35,406
  30,707
  26,086
  21,694
  17,651
  14,043
  10,915
  8,282
  6,129
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

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; 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 streaming on gaming devices. The Tegra Processor segment provides processors that integrate a computer onto a single chip under the Tegra brand name; DRIVE automotive computers, which offer supercomputing capabilities; and tablet and portable devices for mobile gaming 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 design manufacturers, system builders, motherboard manufacturers, add-in board manufacturers, and retailers/distributors. The company has a collaboration with ZENRIN to develop a cloud-to-car HD map solution for self-driving cars. NVIDIA Corporation was founded in 1993 and is headquartered in Santa Clara, California.

FINANCIAL RATIOS  of  NVIDIA (NVDA)

Valuation Ratios
P/E Ratio 35.7
Price to Sales 8.6
Price to Book 10.3
Price to Tangible Book
Price to Cash Flow 35.6
Price to Free Cash Flow 39.8
Growth Rates
Sales Growth Rate 37.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 104.7%
Cap. Spend. - 3 Yr. Gr. Rate -7.1%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 35.1%
Total Debt to Equity 48.9%
Interest Coverage 148
Management Effectiveness
Return On Assets 19.5%
Ret/ On Assets - 3 Yr. Avg. 12.3%
Return On Total Capital 22.9%
Ret/ On T. Cap. - 3 Yr. Avg. 14.7%
Return On Equity 32.6%
Return On Equity - 3 Yr. Avg. 20.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 58.8%
Gross Margin - 3 Yr. Avg. 56.8%
EBITDA Margin 30.5%
EBITDA Margin - 3 Yr. Avg. 23.6%
Operating Margin 28%
Oper. Margin - 3 Yr. Avg. 19.7%
Pre-Tax Margin 27.6%
Pre-Tax Margin - 3 Yr. Avg. 19.5%
Net Profit Margin 24.1%
Net Profit Margin - 3 Yr. Avg. 16.6%
Effective Tax Rate 12.5%
Eff/ Tax Rate - 3 Yr. Avg. 15.4%
Payout Ratio 15.7%

NVDA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NVDA stock intrinsic value calculation we used $6910 million for the last fiscal year's total revenue generated by NVIDIA. The default revenue input number comes from 2017 income statement of NVIDIA. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NVDA stock valuation model: a) initial revenue growth rate of 55.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for NVDA is calculated based on our internal credit rating of NVIDIA, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of NVIDIA.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NVDA stock the variable cost ratio is equal to 37.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2443 million in the base year in the intrinsic value calculation for NVDA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for NVIDIA.

Corporate tax rate of 27% is the nominal tax rate for NVIDIA. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NVDA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NVDA are equal to 9.1%.

Life of production assets of 6.7 years is the average useful life of capital assets used in NVIDIA operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NVDA is equal to 10.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5762 million for NVIDIA - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 586.432 million for NVIDIA is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of NVIDIA at the current share price and the inputted number of shares is $59.6 billion.


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Stock chart of NVDA Financial statements of NVDA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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