NVIDIA is globally recognized for its powerful Graphics Processing Units (GPUs) used in gaming, professional visualization, data centers, and artificial intelligence (AI). The company also manufactures system-on-a-chip units (SoCs) for the mobile computing and automotive markets.
Total Valuation (Company Worth)
- Market Cap: $2.75T – This is the total value of the company in the stock market, showing it is a mega-cap company.
- Enterprise Value (EV): $2.72T – This includes market cap + debt – cash, indicating the true value of the company.
Analysis: NVIDIA is one of the world’s largest companies with a strong market value, making it a stable investment option.
Share Structure (Ownership)
- Shares Outstanding: 24.40B – The total number of shares issued by the company.
- Shares Change YoY: -0.55% – The reduction in shares shows the company is buying back shares, which is beneficial for investors.
- Owned by Insiders: 3.94% – Insider ownership is low, which means the company’s management owns fewer shares, which could be a slightly negative sign.
- Owned by Institutions: 66.61% – High institutional ownership is a positive sign as it shows professional investors trust the company.
Analysis: The high institutional ownership indicates strong market confidence, but low insider ownership could be a concern.
Valuation Ratios (Stock Pricing)
- PE Ratio (Price-to-Earnings): 38.33 – This means investors are willing to pay $38.33 for $1 of earnings, indicating the stock is overvalued.
- Forward PE: 25.06 – This shows future earnings are expected to increase, reducing the PE ratio.
- PS Ratio (Price-to-Sales): 21.20 – Higher PS ratio indicates the stock is costly compared to its revenue.
- PB Ratio (Price-to-Book): 34.77 – High PB ratio means the stock is trading at a higher premium than its book value.
- PEG Ratio: 0.73 – This shows the stock is fairly priced based on growth, which is a positive sign.
Analysis: NVIDIA is currently highly valued, but its future growth potential supports its high valuation.
Profitability Ratios (Earning Power)
- Gross Profit Margin: 74.96% – Indicates high profitability and pricing power.
- Net Profit Margin: 55.84% – Shows that after all expenses, the company retains 55.84% of revenue as profit.
- Return on Equity (ROE): 119.18% – This indicates the company is highly profitable on shareholders’ equity.
- Return on Assets (ROA): 57.42% – Shows the company is effectively using its assets for profits.
- Return on Capital Employed (ROCE): 87.07% – Implies the company is generating huge profits from its capital.
Analysis: NVIDIA has extremely high profit margins, making it a very profitable business model.
Cash Flow (Financial Strength)
- Operating Cash Flow: $64.09B – This shows the cash generated from core business operations.
- Free Cash Flow: $60.85B – Cash remaining after all operating expenses, which can be used for reinvestment or dividends.
- Net Cash: $32.94B – This is the actual cash the company holds after debt clearance.
Analysis: Strong cash flow ensures the company has enough money for expansion and investor returns.
Debt Position (Financial Risk)
- Debt-to-Equity: 0.13 – Very low debt compared to equity, indicating financial stability.
- Debt/EBITDA: 0.12 – Shows the company can easily cover its debt obligations.
- Interest Coverage: 329.77 – This means the company can easily pay its interest with its operating profits.
Analysis: NVIDIA is in a very strong financial position with minimal debt..
Stock Price Forecast (Future Potential)
- Price Target: $174.88 – Analysts predict the stock price could increase to $174.88 in the near future.
- Price Target Difference: 55.19% – This means the stock has a 55.19% upside potential from its current price.
- Analyst Consensus: Strong Buy – Most analysts recommend buying the stock.
Analysis: The future outlook for NVIDIA stock is extremely positive, with high growth potential.
Final Summary
- Positive Points:
- Extremely high revenue and profitability.
- Low debt and strong cash flow.
- High growth potential with strong institutional support.
- Negative Points:
- Very high valuation, making it risky for short-term investors.
- Low insider ownership, which can be concerning.
My Suggestion: If you are a long-term investor, NVIDIA is a golden opportunity due to its high growth potential. However, for short-term investors, the stock seems overvalued, making it risky.
Why Should You Buy NVIDIA Stock?
- High Revenue and Profit: NVIDIA’s revenue is $130.50B, with a massive profit margin of 55.84%, showing strong financial performance.
- Strong Cash Flow: The company has $32.94B net cash, ensuring financial stability and future growth.
- Low Debt: Debt-to-equity ratio is only 0.13, making it financially strong.
- High Growth Potential: Analysts expect a 55% increase in stock price, and future technological advancements in AI, gaming, and data centers will boost NVIDIA’s growth.
- High Institutional Ownership: With 66.61% institutional ownership, professional investors have high confidence in NVIDIA.
Why Should You Avoid NVIDIA Stock?
- Overvalued Stock: With a PE ratio of 38.33 and a PB ratio of 34.77, the stock is trading at a high premium.
- Low Insider Ownership: Only 3.94% of shares are held by insiders, raising concerns about internal confidence.
- Short-Term Risk: Due to high valuation, short-term investors may face volatility and lower returns.
- Limited Dividend: NVIDIA focuses more on growth rather than providing high dividends.
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