As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Nvidia Corp (NVDA).
ProfileNvidia is a leading developer of graphics processing units. Traditionally, GPUs were used to enhance the experience on computing platforms, most notably in gaming applications on PCs. GPU use cases have since emerged as important semiconductors used in artificial intelligence. Nvidia not only offers AI GPUs, but also a software platform, Cuda, used for AI model development and training. Nvidia is also expanding its data center networking solutions, helping to tie GPUs together to handle complex workloads.
Recent PerformanceOver the past twelve months the share price is up 293.10%.
NVDA< data by YChartsInputs
Forecasted Free Cash Flows (FCFs)
Terminal ValueTerminal Value = FCF * (1 + g) / (r – g) = 303.04 billionPresent Value of Terminal ValuePV of Terminal Value = Terminal Value / (1 + WACC)^5 = 171.95 billionPresent Value of Free Cash FlowsPresent Value of FCFs = ∑ (FCF / (1 + r)^n) = 88.48 billionEnterprise ValueEnterprise Value = Present Value of FCFs + Present Value of Terminal Value = 260.43 billionNet DebtNet Debt = Total Debt – Total Cash = 2.42 billionEquity ValueEquity Value = Enterprise Value – Net Debt = 258.01 billionPer-Share DCF ValuePer-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $104.71
Conclusion
Based on the DCF valuation, the stock is overvalued. The DCF value of $104.71 per share is lower than the current market price of $925.99. The Margin of Safety is -784.32%.More By This Author:Netflix Inc. DCF Valuation: Is The Stock Undervalued?
Value Spread, Value Returns, Stock Market All-Time High, Darwin’s Darling
Value Spread Wide, Forward Earnings Rolling Over, Soft Landings
