Intrinsic value of NVIDIA - NVDA

Previous Close

$191.49

  Intrinsic Value

$1,664

stock screener

  Rating & Target

str. buy

+769%

Previous close

$191.49

 
Intrinsic value

$1,664

 
Up/down potential

+769%

 
Rating

str. buy

*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 114.9

 

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
  56.20
  51.08
  46.47
  42.32
  38.59
  35.23
  32.21
  29.49
  27.04
  24.84
  22.85
  21.07
  19.46
  18.01
  16.71
  15.54
  14.49
  13.54
  12.68
  11.92
  11.22
  10.60
  10.04
  9.54
  9.08
  8.68
  8.31
  7.98
  7.68
  7.41
Revenue, $m
  6,910
  10,793
  16,307
  23,885
  33,994
  47,113
  63,712
  84,234
  109,073
  138,567
  172,981
  212,511
  257,281
  307,349
  362,717
  423,337
  489,130
  559,993
  635,809
  716,460
  801,836
  891,840
  986,395
  1,085,449
  1,188,978
  1,296,985
  1,409,507
  1,526,610
  1,648,391
  1,774,980
  1,906,534
Variable operating expenses, $m
 
  4,013
  6,031
  8,805
  12,505
  17,308
  23,384
  30,896
  39,989
  50,785
  63,383
  77,791
  94,180
  112,507
  132,775
  154,965
  179,049
  204,989
  232,742
  262,265
  293,517
  326,464
  361,076
  397,336
  435,233
  474,770
  515,959
  558,825
  603,404
  649,743
  697,899
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
  6,517
  8,598
  11,436
  15,202
  20,072
  26,217
  33,800
  42,966
  53,836
  66,510
  80,996
  97,466
  115,875
  136,227
  158,503
  182,676
  208,706
  236,552
  266,171
  297,520
  330,567
  365,282
  401,647
  439,652
  479,299
  520,601
  563,583
  608,281
  654,742
  703,023
Operating income, $m
  1,934
  4,277
  7,709
  12,449
  18,792
  27,041
  37,495
  50,434
  66,108
  84,731
  106,471
  131,515
  159,816
  191,475
  226,490
  264,834
  306,454
  351,287
  399,257
  450,290
  504,316
  561,273
  621,113
  683,803
  749,326
  817,686
  888,905
  963,026
  1,040,110
  1,120,238
  1,203,511
EBITDA, $m
  2,121
  4,485
  7,992
  12,835
  19,315
  27,743
  38,422
  51,640
  67,651
  86,675
  108,883
  134,401
  163,311
  195,649
  231,416
  270,583
  313,098
  358,893
  407,892
  460,021
  515,206
  573,386
  634,511
  698,545
  765,475
  835,302
  908,049
  983,760
  1,062,498
  1,144,346
  1,229,406
Interest expense (income), $m
  13
  71
  106
  182
  287
  427
  609
  840
  1,124
  1,469
  1,878
  2,355
  2,903
  3,524
  4,219
  4,987
  5,828
  6,740
  7,723
  8,775
  9,893
  11,078
  12,326
  13,638
  15,012
  16,448
  17,946
  19,506
  21,131
  22,820
  24,576
Earnings before tax, $m
  1,905
  4,206
  7,604
  12,267
  18,505
  26,614
  36,886
  49,594
  64,984
  83,262
  104,593
  129,160
  156,913
  187,950
  222,271
  259,847
  300,627
  344,546
  391,534
  441,515
  494,422
  550,195
  608,787
  670,165
  734,315
  801,239
  870,960
  943,519
  1,018,979
  1,097,418
  1,178,935
Tax expense, $m
  239
  1,136
  2,053
  3,312
  4,996
  7,186
  9,959
  13,390
  17,546
  22,481
  28,240
  34,873
  42,366
  50,747
  60,013
  70,159
  81,169
  93,028
  105,714
  119,209
  133,494
  148,553
  164,373
  180,945
  198,265
  216,334
  235,159
  254,750
  275,124
  296,303
  318,312
Net income, $m
  1,666
  3,070
  5,551
  8,955
  13,508
  19,428
  26,927
  36,204
  47,438
  60,781
  76,353
  94,287
  114,546
  137,204
  162,258
  189,688
  219,458
  251,519
  285,819
  322,306
  360,928
  401,643
  444,415
  489,221
  536,050
  584,904
  635,801
  688,769
  743,855
  801,115
  860,623

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
  4,753
  7,180
  10,517
  14,969
  20,745
  28,055
  37,091
  48,029
  61,016
  76,170
  93,576
  113,290
  135,337
  159,717
  186,410
  215,381
  246,584
  279,969
  315,482
  353,076
  392,708
  434,344
  477,961
  523,548
  571,107
  620,655
  672,219
  725,844
  781,585
  839,513
Adjusted assets (=assets-cash), $m
  3,043
  4,753
  7,180
  10,517
  14,969
  20,745
  28,055
  37,091
  48,029
  61,016
  76,170
  93,576
  113,290
  135,337
  159,717
  186,410
  215,381
  246,584
  279,969
  315,482
  353,076
  392,708
  434,344
  477,961
  523,548
  571,107
  620,655
  672,219
  725,844
  781,585
  839,513
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
  982
  1,484
  2,174
  3,093
  4,287
  5,798
  7,665
  9,926
  12,610
  15,741
  19,339
  23,413
  27,969
  33,007
  38,524
  44,511
  50,959
  57,859
  65,198
  72,967
  81,157
  89,762
  98,776
  108,197
  118,026
  128,265
  138,921
  150,004
  161,523
  173,495
Working capital, $m
  6,748
  1,166
  1,761
  2,580
  3,671
  5,088
  6,881
  9,097
  11,780
  14,965
  18,682
  22,951
  27,786
  33,194
  39,173
  45,720
  52,826
  60,479
  68,667
  77,378
  86,598
  96,319
  106,531
  117,229
  128,410
  140,074
  152,227
  164,874
  178,026
  191,698
  205,906
Total debt, $m
  2,816
  3,014
  5,199
  8,203
  12,209
  17,408
  23,986
  32,119
  41,963
  53,651
  67,290
  82,956
  100,698
  120,540
  142,482
  166,506
  192,580
  220,663
  250,709
  282,671
  316,506
  352,174
  389,647
  428,902
  469,930
  512,734
  557,326
  603,734
  651,996
  702,164
  754,299
Total liabilities, $m
  4,079
  4,277
  6,462
  9,466
  13,472
  18,671
  25,249
  33,382
  43,226
  54,914
  68,553
  84,219
  101,961
  121,803
  143,745
  167,769
  193,843
  221,926
  251,972
  283,934
  317,769
  353,437
  390,910
  430,165
  471,193
  513,997
  558,589
  604,997
  653,259
  703,427
  755,562
Total equity, $m
  5,762
  475
  718
  1,052
  1,497
  2,075
  2,805
  3,709
  4,803
  6,102
  7,617
  9,358
  11,329
  13,534
  15,972
  18,641
  21,538
  24,658
  27,997
  31,548
  35,308
  39,271
  43,434
  47,796
  52,355
  57,111
  62,065
  67,222
  72,584
  78,159
  83,951
Total liabilities and equity, $m
  9,841
  4,752
  7,180
  10,518
  14,969
  20,746
  28,054
  37,091
  48,029
  61,016
  76,170
  93,577
  113,290
  135,337
  159,717
  186,410
  215,381
  246,584
  279,969
  315,482
  353,077
  392,708
  434,344
  477,961
  523,548
  571,108
  620,654
  672,219
  725,843
  781,586
  839,513
Debt-to-equity ratio
  0.489
  6.340
  7.240
  7.800
  8.160
  8.390
  8.550
  8.660
  8.740
  8.790
  8.830
  8.870
  8.890
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  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
  3,070
  5,551
  8,955
  13,508
  19,428
  26,927
  36,204
  47,438
  60,781
  76,353
  94,287
  114,546
  137,204
  162,258
  189,688
  219,458
  251,519
  285,819
  322,306
  360,928
  401,643
  444,415
  489,221
  536,050
  584,904
  635,801
  688,769
  743,855
  801,115
  860,623
Depreciation, amort., depletion, $m
  187
  208
  283
  386
  524
  702
  927
  1,206
  1,543
  1,944
  2,411
  2,886
  3,494
  4,174
  4,926
  5,750
  6,643
  7,606
  8,636
  9,731
  10,891
  12,113
  13,397
  14,743
  16,149
  17,616
  19,144
  20,735
  22,389
  24,108
  25,895
Funds from operations, $m
  993
  3,279
  5,834
  9,341
  14,032
  20,130
  27,854
  37,410
  48,981
  62,725
  78,764
  97,173
  118,041
  141,378
  167,184
  195,438
  226,101
  259,125
  294,455
  332,037
  371,819
  413,756
  457,812
  503,963
  552,198
  602,520
  654,945
  709,504
  766,243
  825,223
  886,517
Change in working capital, $m
  -679
  419
  595
  818
  1,092
  1,417
  1,793
  2,216
  2,683
  3,185
  3,717
  4,269
  4,835
  5,407
  5,980
  6,547
  7,106
  7,653
  8,188
  8,710
  9,221
  9,720
  10,212
  10,698
  11,181
  11,665
  12,152
  12,647
  13,152
  13,672
  14,208
Cash from operations, $m
  1,672
  2,859
  5,238
  8,523
  12,940
  18,713
  26,061
  35,193
  46,299
  59,540
  75,048
  92,904
  113,206
  135,971
  161,205
  188,891
  218,995
  251,472
  286,267
  323,327
  362,598
  404,035
  447,600
  493,265
  541,017
  590,855
  642,792
  696,857
  753,091
  811,551
  872,309
Maintenance CAPEX, $m
  0
  -94
  -147
  -221
  -324
  -462
  -640
  -865
  -1,144
  -1,481
  -1,882
  -2,349
  -2,886
  -3,494
  -4,174
  -4,926
  -5,750
  -6,643
  -7,606
  -8,636
  -9,731
  -10,891
  -12,113
  -13,397
  -14,743
  -16,149
  -17,616
  -19,144
  -20,735
  -22,389
  -24,108
New CAPEX, $m
  -176
  -354
  -502
  -690
  -920
  -1,194
  -1,511
  -1,867
  -2,260
  -2,684
  -3,132
  -3,597
  -4,074
  -4,556
  -5,038
  -5,516
  -5,987
  -6,448
  -6,899
  -7,339
  -7,769
  -8,190
  -8,605
  -9,014
  -9,421
  -9,829
  -10,239
  -10,656
  -11,082
  -11,520
  -11,971
Cash from investing activities, $m
  -793
  -448
  -649
  -911
  -1,244
  -1,656
  -2,151
  -2,732
  -3,404
  -4,165
  -5,014
  -5,946
  -6,960
  -8,050
  -9,212
  -10,442
  -11,737
  -13,091
  -14,505
  -15,975
  -17,500
  -19,081
  -20,718
  -22,411
  -24,164
  -25,978
  -27,855
  -29,800
  -31,817
  -33,909
  -36,079
Free cash flow, $m
  879
  2,412
  4,590
  7,612
  11,696
  17,057
  23,911
  32,461
  42,894
  55,375
  70,034
  86,957
  106,245
  127,920
  151,992
  178,448
  207,258
  238,380
  271,762
  307,352
  345,098
  384,954
  426,882
  470,854
  516,854
  564,878
  614,937
  667,056
  721,274
  777,643
  836,230
Issuance/(repayment) of debt, $m
  1,315
  994
  2,185
  3,003
  4,006
  5,199
  6,578
  8,133
  9,844
  11,688
  13,638
  15,666
  17,742
  19,842
  21,942
  24,024
  26,074
  28,083
  30,046
  31,962
  33,835
  35,669
  37,472
  39,255
  41,028
  42,803
  44,592
  46,408
  48,262
  50,167
  52,135
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
  994
  2,185
  3,003
  4,006
  5,199
  6,578
  8,133
  9,844
  11,688
  13,638
  15,666
  17,742
  19,842
  21,942
  24,024
  26,074
  28,083
  30,046
  31,962
  33,835
  35,669
  37,472
  39,255
  41,028
  42,803
  44,592
  46,408
  48,262
  50,167
  52,135
Total cash flow (excl. dividends), $m
  1,431
  3,406
  6,775
  10,615
  15,702
  22,256
  30,489
  40,593
  52,738
  67,063
  83,672
  102,623
  123,988
  147,762
  173,934
  202,472
  233,332
  266,463
  301,808
  339,314
  378,933
  420,623
  464,355
  510,109
  557,882
  607,681
  659,529
  713,464
  769,536
  827,811
  888,365
Retained Cash Flow (-), $m
  -1,293
  -715
  -243
  -334
  -445
  -578
  -731
  -904
  -1,094
  -1,299
  -1,515
  -1,741
  -1,971
  -2,205
  -2,438
  -2,669
  -2,897
  -3,120
  -3,338
  -3,551
  -3,759
  -3,963
  -4,164
  -4,362
  -4,559
  -4,756
  -4,955
  -5,156
  -5,362
  -5,574
  -5,793
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
 
  8,693
  6,532
  10,281
  15,257
  21,679
  29,758
  39,690
  51,645
  65,764
  82,157
  100,882
  122,016
  145,557
  171,496
  199,803
  230,435
  263,342
  298,469
  335,763
  375,173
  416,660
  460,191
  505,748
  553,323
  602,925
  654,575
  708,308
  764,174
  822,236
  882,572
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
 
  8,335
  5,980
  8,947
  12,563
  16,804
  21,597
  26,814
  32,279
  37,778
  43,072
  47,907
  52,069
  55,344
  57,574
  58,659
  58,558
  57,299
  54,966
  51,698
  47,673
  43,096
  38,184
  33,147
  28,182
  23,455
  19,097
  15,202
  11,823
  8,975
  6,645
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 focuses on personal computer (PC) graphics, graphics processing unit (GPU) and also on artificial intelligence (AI). The Company's operates through two segments: GPU and Tegra Processor. 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. The Company's processor has created platforms that address four markets: Gaming, Professional Visualization, Datacenter, and Automotive. The Company's offerings include NVIDIA DGX AI supercomputer, the NVIDIA DRIVE AI car computing platform and the GeForce NOW cloud gaming service.

FINANCIAL RATIOS  of  NVIDIA (NVDA)

Valuation Ratios
P/E Ratio 67.2
Price to Sales 16.2
Price to Book 19.4
Price to Tangible Book
Price to Cash Flow 67
Price to Free Cash Flow 74.9
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 56.2% 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 600 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 $114.9 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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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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