Is NVIDIA Corporation (NVDA) a Good Stock to Buy?

Page 1 of 2

NVIDIA Corporation (NASDAQ:NVDA) has fallen in price over the last year against a rising market, as flat financials have been compounded by concerns about the declining PC industry (the company provides components, most notably graphics processors, for personal and mobile computing devices). In the fiscal year ending in January 2013, NVIDIA Corporation (NASDAQ:NVDA) actually managed 7% revenue growth compared to the previous fiscal year, though higher operating expenses left the company with flat pretax income (and then a higher effective tax rate causing a decline in reported earnings). Cash flow from operations also decreased.

At a market capitalization of $7.8 billion, NVIDIA Corporation (NASDAQ:NVDA) trades at 14 times trailing earnings. If the company were growing its earnings, that might be cheap enough for it to be worthy of consideration as a value stock; however, we’ve seen that the business has been struggling and we’d expect that to continue as the PC industry likely declines further. Wall Street analysts, who are notoriously bullish about nearly everything, expect EPS to decline over the next couple years and as a result the forward P/E is 16. We would note that a large share of Nvidia’s value is cash, with over $3.7 billion in cash, cash equivalents, and marketable securities. As a result, the valuation does look a bit better in cash flow terms with an EV/EBITDA multiple of 5.0x.

NVIDIA Corporation (NASDAQ:NVDA)We track 13F filings from hedge funds and other notable investors as part of our work developing investing strategies; we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about imitating small cap picks). We can also use our database to see which funds owned NVIDIA Corporation (NASDAQ:NVDA) as of the end of December. Billionaire Steve Cohen’s SAC Capital Advisors increased the size of its position during Q4 to a total of 2.7 million shares (see Cohen’s stock picks). AQR Capital Management, managed by Cliff Asness, reported owning a little over 2 million shares (find Asness’s favorite stocks).

The two closest peers for Nvidia are Advanced Micro Devices, Inc. (NYSE:AMD) and Intel Corporation (NASDAQ:INTC), which provide processors and graphics cards for PCs. Advanced Micro Devices, Inc. (NYSE:AMD) is unprofitable on a trailing basis, and consensus forecasts from the Street call for negative earnings this year and in 2014 as well. 15% of Advanced Micro Devices, Inc. (NYSE:AMD)’s float is held short, a much higher figure than what we see at Nvidia. With barely any EBITDA either, we don’t think that it is a good stock to buy right now. Intel Corporation (NASDAQ:INTC)’s net income decreased by 27% in its last quarterly report compared to the fourth quarter of 2011, though revenue was down only 3%. The stock is at least cheap, with a trailing P/E of 10, and at current prices and dividend levels it pays a dividend yield of 4.2%. We wouldn’t recommend Intel Corporation (NASDAQ:INTC) as a value stock until the company was able to stabilize its earnings, but income investors might consider it.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!