Image Source: Unsplash
 

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).
 

Profile

Nvidia 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 Performance

Over the past twelve months the share price is up 293.10%.

NVDA< data by YCharts

Inputs

• Discount Rate: 12%
• Terminal Growth Rate: 2%
• WACC: 12%

Forecasted Free Cash Flows (FCFs)

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = 303.04 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 171.95 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 88.48 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 260.43 billion

Net Debt

Net Debt = Total Debt – Total Cash = 2.42 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 258.01 billion

Per-Share DCF Value

Per-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