In today's rapidly changing and highly competitive business world, it is imperative for investors and industry observers to carefully assess companies before making investment choices. In this article, we will undertake a comprehensive industry comparison, evaluating NVIDIA (NASDAQ:NVDA) vis-à-vis its key competitors in the Semiconductors & Semiconductor Equipment industry. Through a detailed analysis of important financial indicators, market standing, and growth potential, our goal is to provide valuable insights and highlight company's performance in the industry.
NVIDIA Background
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.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| NVIDIA Corp | 53.43 | 50.30 | 29.71 | 31.13% | $22.86 | $26.16 | 93.61% |
| Taiwan Semiconductor Manufacturing Co Ltd | 29.01 | 7.64 | 11.49 | 8.36% | $555.05 | $439.35 | 38.95% |
| Broadcom Inc | 128.97 | 11.36 | 15.81 | -2.77% | $6.39 | $8.36 | 47.27% |
| Advanced Micro Devices Inc | 120.57 | 3.88 | 9.17 | 1.36% | $1.55 | $3.42 | 17.57% |
| Texas Instruments Inc | 37.02 | 10.52 | 11.64 | 7.86% | $2.09 | $2.47 | -8.41% |
| Qualcomm Inc | 17.49 | 6.61 | 4.54 | 11.46% | $3.21 | $5.78 | 18.69% |
| ARM Holdings PLC | 220.49 | 23.32 | 40.09 | 1.83% | $0.11 | $0.81 | 4.71% |
| Micron Technology Inc | 140.29 | 2.42 | 4.37 | 1.99% | $3.63 | $2.74 | 93.27% |
| Analog Devices Inc | 66.21 | 3.06 | 11.49 | 1.36% | $1.12 | $1.42 | -10.06% |
| Microchip Technology Inc | 47.13 | 5.81 | 6.72 | 1.24% | $0.34 | $0.67 | -48.37% |
| ON Semiconductor Corp | 17.46 | 3.49 | 4.15 | 4.75% | $0.63 | $0.8 | -19.21% |
| Monolithic Power Systems Inc | 63.16 | 11.62 | 13.44 | 6.35% | $0.17 | $0.34 | 30.59% |
| STMicroelectronics NV | 10.46 | 1.30 | 1.68 | 1.98% | $0.74 | $1.23 | -26.63% |
| First Solar Inc | 16.59 | 2.71 | 5.38 | 4.22% | $0.45 | $0.45 | 10.81% |
| ASE Technology Holding Co Ltd | 18.86 | 2.16 | 1.13 | 3.16% | $28.59 | $26.43 | 3.85% |
| United Microelectronics Corp | 10.56 | 1.48 | 2.37 | 4.0% | $29.73 | $20.43 | 5.99% |
| Skyworks Solutions Inc | 23.52 | 2.19 | 3.36 | 0.95% | $0.18 | $0.43 | -15.9% |
| MACOM Technology Solutions Holdings Inc | 126.61 | 8.46 | 13.28 | 2.67% | $0.05 | $0.11 | 33.47% |
| Lattice Semiconductor Corp | 55.22 | 11.04 | 13.87 | 1.03% | $0.03 | $0.09 | -33.87% |
| Universal Display Corp | 32.36 | 4.82 | 11.93 | 4.29% | $0.08 | $0.13 | 14.57% |
| Average | 62.21 | 6.52 | 9.78 | 3.48% | $33.38 | $27.13 | 8.28% |
Through a meticulous analysis of NVIDIA, we can observe the following trends:
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A Price to Earnings ratio of 53.43 significantly below the industry average by 0.86x suggests undervaluation. This can make the stock appealing for those seeking growth.
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It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 50.3 which exceeds the industry average by 7.71x.
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The stock's relatively high Price to Sales ratio of 29.71, surpassing the industry average by 3.04x, may indicate an aspect of overvaluation in terms of sales performance.
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With a Return on Equity (ROE) of 31.13% that is 27.65% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.
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With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $22.86 Billion, which is 0.68x below the industry average, the company may face lower profitability or financial challenges.
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The gross profit of $26.16 Billion is 0.96x below that of its industry, suggesting potential lower revenue after accounting for production costs.
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With a revenue growth of 93.61%, which surpasses the industry average of 8.28%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
When evaluating NVIDIA alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
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Among its top 4 peers, NVIDIA has a stronger financial position with a lower debt-to-equity ratio of 0.16.
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This indicates that the company relies less on debt financing and maintains a more favorable balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
For NVIDIA, the PE ratio is low compared to peers, indicating potential undervaluation. The high PB and PS ratios suggest strong market sentiment and revenue multiples. The high ROE reflects efficient use of shareholder equity, while low EBITDA and gross profit may indicate operational challenges. The high revenue growth signifies strong sales performance relative to industry peers in the Semiconductors & Semiconductor Equipment sector.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
