CHICAGO’S HARVARD INVESTMENT CLUB EVALUATES – NVIDIA STOCK
SLIDES
Disclaimer: Good Day, Readers. WealthBuildingPowers blog is a financial literacy/competency blog and does not provide specific investment recommendations.
I am a member of the Chicago Harvard Investment Club and, on November 3, 2021, presented the above slide deck to my peers. I am providing this slide deck as an example of how I evaluate a potential investment.
NVIDIA
The company, Nvidia, is a leading designer of graphics processing units– GPUs. GPUs are programmable processors specialized for rendering all images on the computer’s screen, providing the fastest graphics processing. Nvidia’s stock has increased in price ~1,500 percent over the past five years and ~70% YTD 2021.
Historical performance is NOT an indication of future performance.
CLUB DISCUSSION POINTS
VALUATIONS
- Price to earnings ratio P/E ratio– The price-to-earnings ratio, or P/E ratio, is the stock price divided by earnings per share. P/E allowed us to compare that cost over time with Nvidia’s peers/competitors.
- Price-to-sales P/S ratio– P/S Is based on the top line rather than earnings per share; the ratio is not impacted by the reduction in the number of shares from share repurchases.
- Price to Cash Flow (P/CF) ratio is a multiple that compares a company’s market value to its operating cash flow or its stock price per share to operating cash flow per share.
OTHER METRICS AND FACTORS
- Return on Invested Capital (ROIC) is calculated by dividing net operating profit, after-tax, by invested capital. It’s a way to judge how well a company’s management allocates money to generate a return.
- Competitors- We discussed Nvidia’s major competitors, including Intel. Intel acquired Mobiley in 2017, challenging Nvidia’s plan to grow its automotive win pipeline to $8 billion through fiscal 2027 (calendar 2026).
PROS FOR BUYING
- Artificial intelligence and deep learning phenomena that rely on Nvidia’s graphics chips present the firm with a potentially massive growth opportunity.
- First-mover advantage in the autonomous driving market could lead to widespread adoption of its Drive PX self-driving platform.
- The increasing complexity of graphics processors provides a barrier to entry for most potential rivals, as it would be challenging to match Nvidia’s large R&D budget.
- Nvidia is the leader in discrete graphics. Significant barriers to entry.
- Nvidia has a considerable research and development budget compared with Advanced Micro Devices and smaller GPU suppliers, allowing innovation and high-margin chips.
RISKS IN BUYING CURRENTLY
- The artificial intelligence opportunity remains promising, BUT not a foregone conclusion for Nvidia’s GPUs to dominate.
- Nvidia’s automotive endeavors face plenty of competition, as numerous chipmakers are targeting the market.
- A large portion of sales today come from the maturing PC industry via PC gaming.
CONCLUSION – CHICAGO’S HARVARD INVESTMENT CLUB EVALUATES – NVIDIA STOCK
The slide deck appendix shows the ten reference sources I utilized to make this evaluation.
When investing your HARD-EARNED MONEY, ALWAYS DO YOUR HOMEWORK.
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I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an NC. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, real estate and am happy to share my finance and investment lessons. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. As an investor, you must establish your risk/loss tolerance. Investment in any asset involves risk, including complete loss.
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