Intrinsic value of NVIDIA - NVDA

Previous Close

$161.50

  Intrinsic Value

$627.50

stock screener

  Rating & Target

str. buy

+289%

  Value-price divergence*

+3789%

Previous close

$161.50

 
Intrinsic value

$627.50

 
Up/down potential

+289%

 
Rating

str. buy

 
Value-price divergence*

+3789%

*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 84.0

 

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
  37.90
  34.61
  31.65
  28.98
  26.59
  24.43
  22.48
  20.74
  19.16
  17.75
  16.47
  15.32
  14.29
  13.36
  12.53
  11.77
  11.10
  10.49
  9.94
  9.44
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
Revenue, $m
  6,910
  9,529
  12,827
  16,886
  21,781
  27,571
  34,306
  42,020
  50,733
  60,455
  71,183
  82,908
  95,613
  109,278
  123,881
  139,398
  155,811
  173,100
  191,253
  210,260
  230,118
  250,828
  272,399
  294,844
  318,184
  342,443
  367,653
  393,851
  421,079
  449,383
  478,816
Variable operating expenses, $m
 
  3,550
  4,757
  6,243
  8,035
  10,154
  12,620
  15,443
  18,633
  22,192
  26,119
  30,349
  35,000
  40,002
  45,347
  51,028
  57,036
  63,364
  70,009
  76,967
  84,236
  91,817
  99,713
  107,930
  116,473
  125,353
  134,582
  144,172
  154,139
  164,499
  175,274
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
  6,054
  7,324
  8,874
  10,732
  12,918
  15,453
  18,347
  21,610
  25,243
  29,246
  33,554
  38,286
  43,370
  48,799
  54,566
  60,663
  67,081
  73,819
  80,873
  88,239
  95,920
  103,919
  112,241
  120,892
  129,882
  139,224
  148,930
  159,016
  169,498
  180,398
Operating income, $m
  1,934
  3,475
  5,503
  8,012
  11,049
  14,653
  18,853
  23,672
  29,123
  35,212
  41,937
  49,354
  57,328
  65,908
  75,081
  84,833
  95,149
  106,019
  117,433
  129,387
  141,878
  154,907
  168,480
  182,604
  197,292
  212,560
  228,429
  244,921
  262,063
  279,884
  298,418
EBITDA, $m
  2,121
  3,623
  5,682
  8,228
  11,309
  14,966
  19,227
  24,117
  29,647
  35,824
  42,647
  50,108
  58,198
  66,903
  76,209
  86,101
  96,567
  107,594
  119,174
  131,301
  143,972
  157,190
  170,958
  185,287
  200,187
  215,677
  231,775
  248,505
  265,894
  283,973
  302,775
Interest expense (income), $m
  13
  71
  114
  169
  236
  318
  414
  526
  654
  799
  960
  1,139
  1,333
  1,544
  1,772
  2,014
  2,272
  2,545
  2,832
  3,134
  3,449
  3,779
  4,124
  4,482
  4,855
  5,243
  5,646
  6,065
  6,500
  6,952
  7,423
Earnings before tax, $m
  1,905
  3,404
  5,389
  7,843
  10,813
  14,335
  18,439
  23,147
  28,470
  34,413
  40,977
  48,215
  55,994
  64,364
  73,310
  82,818
  92,877
  103,474
  114,601
  126,254
  138,429
  151,128
  164,356
  178,122
  192,437
  207,318
  222,783
  238,856
  255,563
  272,931
  290,995
Tax expense, $m
  239
  919
  1,455
  2,118
  2,920
  3,870
  4,979
  6,250
  7,687
  9,292
  11,064
  13,018
  15,118
  17,378
  19,794
  22,361
  25,077
  27,938
  30,942
  34,089
  37,376
  40,805
  44,376
  48,093
  51,958
  55,976
  60,151
  64,491
  69,002
  73,692
  78,569
Net income, $m
  1,666
  2,485
  3,934
  5,726
  7,893
  10,465
  13,461
  16,897
  20,783
  25,122
  29,913
  35,197
  40,876
  46,986
  53,516
  60,457
  67,800
  75,536
  83,659
  92,165
  101,053
  110,323
  119,980
  130,029
  140,479
  151,342
  162,632
  174,365
  186,561
  199,240
  212,426

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
  6,594
  8,877
  11,686
  15,073
  19,081
  23,741
  29,079
  35,109
  41,837
  49,262
  57,376
  66,168
  75,625
  85,730
  96,469
  107,828
  119,793
  132,355
  145,509
  159,251
  173,583
  188,511
  204,044
  220,196
  236,985
  254,431
  272,561
  291,404
  310,991
  331,360
Adjusted assets (=assets-cash), $m
  3,043
  6,594
  8,877
  11,686
  15,073
  19,081
  23,741
  29,079
  35,109
  41,837
  49,262
  57,376
  66,168
  75,625
  85,730
  96,469
  107,828
  119,793
  132,355
  145,509
  159,251
  173,583
  188,511
  204,044
  220,196
  236,985
  254,431
  272,561
  291,404
  310,991
  331,360
Revenue / Adjusted assets
  2.271
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
  1.445
Average production assets, $m
  629
  867
  1,167
  1,537
  1,982
  2,509
  3,122
  3,824
  4,617
  5,501
  6,478
  7,545
  8,701
  9,944
  11,273
  12,685
  14,179
  15,752
  17,404
  19,134
  20,941
  22,825
  24,788
  26,831
  28,955
  31,162
  33,456
  35,840
  38,318
  40,894
  43,572
Working capital, $m
  6,748
  1,029
  1,385
  1,824
  2,352
  2,978
  3,705
  4,538
  5,479
  6,529
  7,688
  8,954
  10,326
  11,802
  13,379
  15,055
  16,828
  18,695
  20,655
  22,708
  24,853
  27,089
  29,419
  31,843
  34,364
  36,984
  39,707
  42,536
  45,476
  48,533
  51,712
Total debt, $m
  2,816
  3,261
  4,826
  6,754
  9,077
  11,826
  15,024
  18,685
  22,822
  27,437
  32,530
  38,097
  44,128
  50,616
  57,548
  64,915
  72,707
  80,915
  89,533
  98,556
  107,983
  117,815
  128,056
  138,711
  149,792
  161,309
  173,277
  185,714
  198,640
  212,077
  226,050
Total liabilities, $m
  4,079
  4,524
  6,089
  8,017
  10,340
  13,089
  16,287
  19,948
  24,085
  28,700
  33,793
  39,360
  45,391
  51,879
  58,811
  66,178
  73,970
  82,178
  90,796
  99,819
  109,246
  119,078
  129,319
  139,974
  151,055
  162,572
  174,540
  186,977
  199,903
  213,340
  227,313
Total equity, $m
  5,762
  2,071
  2,787
  3,669
  4,733
  5,991
  7,455
  9,131
  11,024
  13,137
  15,468
  18,016
  20,777
  23,746
  26,919
  30,291
  33,858
  37,615
  41,559
  45,690
  50,005
  54,505
  59,193
  64,070
  69,142
  74,413
  79,891
  85,584
  91,501
  97,651
  104,047
Total liabilities and equity, $m
  9,841
  6,595
  8,876
  11,686
  15,073
  19,080
  23,742
  29,079
  35,109
  41,837
  49,261
  57,376
  66,168
  75,625
  85,730
  96,469
  107,828
  119,793
  132,355
  145,509
  159,251
  173,583
  188,512
  204,044
  220,197
  236,985
  254,431
  272,561
  291,404
  310,991
  331,360
Debt-to-equity ratio
  0.489
  1.570
  1.730
  1.840
  1.920
  1.970
  2.020
  2.050
  2.070
  2.090
  2.100
  2.110
  2.120
  2.130
  2.140
  2.140
  2.150
  2.150
  2.150
  2.160
  2.160
  2.160
  2.160
  2.170
  2.170
  2.170
  2.170
  2.170
  2.170
  2.170
  2.170
Adjusted equity ratio
  -0.340
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,666
  2,485
  3,934
  5,726
  7,893
  10,465
  13,461
  16,897
  20,783
  25,122
  29,913
  35,197
  40,876
  46,986
  53,516
  60,457
  67,800
  75,536
  83,659
  92,165
  101,053
  110,323
  119,980
  130,029
  140,479
  151,342
  162,632
  174,365
  186,561
  199,240
  212,426
Depreciation, amort., depletion, $m
  187
  149
  179
  215
  260
  313
  374
  444
  523
  612
  710
  754
  870
  994
  1,127
  1,269
  1,418
  1,575
  1,740
  1,913
  2,094
  2,283
  2,479
  2,683
  2,895
  3,116
  3,346
  3,584
  3,832
  4,089
  4,357
Funds from operations, $m
  993
  2,634
  4,112
  5,941
  8,153
  10,777
  13,835
  17,341
  21,306
  25,734
  30,623
  35,951
  41,746
  47,980
  54,643
  61,726
  69,218
  77,111
  85,399
  94,079
  103,147
  112,606
  122,459
  132,712
  143,374
  154,458
  165,977
  177,949
  190,393
  203,329
  216,784
Change in working capital, $m
  -679
  283
  356
  438
  529
  625
  727
  833
  941
  1,050
  1,159
  1,266
  1,372
  1,476
  1,577
  1,676
  1,773
  1,867
  1,960
  2,053
  2,145
  2,237
  2,330
  2,424
  2,521
  2,620
  2,723
  2,829
  2,941
  3,057
  3,179
Cash from operations, $m
  1,672
  2,351
  3,756
  5,503
  7,625
  10,152
  13,107
  16,508
  20,365
  24,684
  29,464
  34,685
  40,374
  46,504
  53,066
  60,050
  67,445
  75,244
  83,439
  92,026
  101,003
  110,369
  120,129
  130,288
  140,854
  151,838
  163,255
  175,120
  187,452
  200,273
  213,605
Maintenance CAPEX, $m
  0
  -63
  -87
  -117
  -154
  -198
  -251
  -312
  -382
  -462
  -550
  -648
  -754
  -870
  -994
  -1,127
  -1,269
  -1,418
  -1,575
  -1,740
  -1,913
  -2,094
  -2,283
  -2,479
  -2,683
  -2,895
  -3,116
  -3,346
  -3,584
  -3,832
  -4,089
New CAPEX, $m
  -176
  -239
  -300
  -369
  -445
  -527
  -613
  -702
  -793
  -885
  -976
  -1,067
  -1,156
  -1,244
  -1,329
  -1,412
  -1,494
  -1,573
  -1,652
  -1,730
  -1,807
  -1,885
  -1,963
  -2,043
  -2,124
  -2,208
  -2,294
  -2,384
  -2,478
  -2,576
  -2,678
Cash from investing activities, $m
  -793
  -302
  -387
  -486
  -599
  -725
  -864
  -1,014
  -1,175
  -1,347
  -1,526
  -1,715
  -1,910
  -2,114
  -2,323
  -2,539
  -2,763
  -2,991
  -3,227
  -3,470
  -3,720
  -3,979
  -4,246
  -4,522
  -4,807
  -5,103
  -5,410
  -5,730
  -6,062
  -6,408
  -6,767
Free cash flow, $m
  879
  2,049
  3,369
  5,017
  7,026
  9,427
  12,244
  15,494
  19,190
  23,337
  27,937
  32,970
  38,463
  44,391
  50,743
  57,511
  64,683
  72,253
  80,212
  88,556
  97,282
  106,391
  115,884
  125,766
  136,047
  146,735
  157,844
  169,390
  181,390
  193,865
  206,837
Issuance/(repayment) of debt, $m
  1,315
  1,241
  1,566
  1,927
  2,324
  2,749
  3,197
  3,662
  4,137
  4,615
  5,093
  5,566
  6,032
  6,487
  6,932
  7,367
  7,792
  8,208
  8,618
  9,023
  9,427
  9,832
  10,241
  10,656
  11,080
  11,517
  11,968
  12,437
  12,926
  13,437
  13,973
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
  1,241
  1,566
  1,927
  2,324
  2,749
  3,197
  3,662
  4,137
  4,615
  5,093
  5,566
  6,032
  6,487
  6,932
  7,367
  7,792
  8,208
  8,618
  9,023
  9,427
  9,832
  10,241
  10,656
  11,080
  11,517
  11,968
  12,437
  12,926
  13,437
  13,973
Total cash flow (excl. dividends), $m
  1,431
  3,290
  4,935
  6,944
  9,349
  12,176
  15,441
  19,156
  23,326
  27,953
  33,031
  38,537
  44,495
  50,878
  57,676
  64,877
  72,475
  80,461
  88,830
  97,579
  106,709
  116,223
  126,124
  136,422
  147,127
  158,252
  169,813
  181,827
  194,316
  207,302
  220,810
Retained Cash Flow (-), $m
  -1,293
  -571
  -717
  -882
  -1,064
  -1,258
  -1,463
  -1,676
  -1,893
  -2,113
  -2,331
  -2,548
  -2,761
  -2,969
  -3,173
  -3,372
  -3,566
  -3,757
  -3,945
  -4,130
  -4,315
  -4,500
  -4,687
  -4,877
  -5,072
  -5,272
  -5,478
  -5,693
  -5,917
  -6,151
  -6,396
Prev. year cash balance distribution, $m
 
  4,262
  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
 
  6,981
  4,218
  6,062
  8,286
  10,918
  13,977
  17,480
  21,433
  25,840
  30,699
  35,989
  41,734
  47,909
  54,502
  61,505
  68,908
  76,704
  84,885
  93,449
  102,394
  111,722
  121,437
  131,545
  142,055
  152,980
  164,334
  176,134
  188,400
  201,152
  214,414
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
 
  6,694
  3,862
  5,275
  6,823
  8,462
  10,144
  11,809
  13,396
  14,844
  16,094
  17,091
  17,809
  18,216
  18,297
  18,057
  17,511
  16,689
  15,632
  14,388
  13,011
  11,556
  10,076
  8,622
  7,235
  5,951
  4,794
  3,780
  2,915
  2,196
  1,614
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 56.7
Price to Sales 13.7
Price to Book 16.4
Price to Tangible Book
Price to Cash Flow 56.5
Price to Free Cash Flow 63.2
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 37.9% 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 10 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 519.992 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 $84.0 billion.

Articles on NVDA

NVIDIA Corporation soon to be acquired?

NVIDIA Corporation is set to dominate not just the next-generation chips for the gaming market, but also power the next major wave, or rather revolution, of technological innovation – artificial intelligence.  [June 06, 2017]  read article

NVIDIA is set to beat the market again

Despite a spectacular run last year, when the share price increased close to four-fold, the company’s stock has potential for farther three-fold increase.  [March 20, 2017]  read article

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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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