As reflected at the current price of $791, what future NVIDIA operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, NVIDIA shares will need to reach $1326. Upper quartile performance will require a $1561 NVIDIA stock price by 2030.
Executive Summary
- NVIDIA’s important characteristics: high expected growth, high financial strength, very high profitability, and low stability. A big positive influence on NVIDIA’s valuation is its superior Growth.
- Very high valuation, leading shareholder returns. Current valuation levels are very high relative to the NVIDIA Peer Group. Recent market returns have significantly outperformed the NVIDIA Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, NVIDIA shares should reach a level of $7089 by 2030 — an 44.1% per year total shareholder return. A 2030 stock price of $1326 would reflect median performance and a price of $1561 would be required to reach upper quartile performance.
- Growth has been NVIDIA’s biggest valuation strength. Historical growth has been very high relative to the NVIDIA Peer Group and forecasted growth is relatively very high. Equity Growth, EPS Growth, Revenue Growth, and Asset Growth have all been superior. These factors have buoyed market perceptions of NVIDIA. NVIDIA’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. NVIDIA’s consensus growth expectations are lower than historical growth.
- Pretax ROA, Pretax Margin, Asset Turnover, and Return on Equity are all group leading. These factors have strengthened market perceptions of NVIDIA. The company has below average cash and will have to work to generate attractive investment opportunities and improve valuation.
- NVIDIA’s risk profile is neutral. Overall variability has been very high with very high revenue variability, very high E.P.S. variability, and very high stock price volatility. Financial Strength is relatively very high and earnings’ expectations are relatively very high. The debt/capital ratio has declined very significantly.
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