How Does Nvidia’s Valuation Compare To Its Peers?

October 2nd, 2019 by Trefis Team
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Nvidia’s (NASDAQ:NVDA) market cap is much lower than Intel’s, but higher than that of AMD. Nvidia has garnered higher revenue growth, as well as higher adjusted net earnings margin, when compared to its peers. This justifies its higher P/E Multiple over Intel, though it is lower than that of AMD, which has been gaining market share from Intel. Nvidia’s strong cash position has also been favorable for its P/E Multiple. Overall, it appears that Nvidia is currently fairly valued when compared to its peers, in our view. In this note we compare Nvidia’s valuation to AMD and Intel.
You can look at our interactive dashboard analysis ~ NVDA Valuation: How Does Nvidia’s Valuation Compare To Its Peers? ~ for more details. In addition, you can see more of our data for Information Technology companies here. 

Nvidia’s Market Cap Is Lower Than Intel’s, But Higher Than That of AMD.

  • Market Cap:
    • Nvidia: $108 Billion
    • Intel:    $226 Billion
    • AMD:   $32 Billion
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Nvidia’s Price To Earnings Multiple Is Lower Than That of AMD But Higher Than That of Intel, On Average Consensus Earnings Estimate For Current Year (Fiscal).

  • Nvidia’s P/E Multiple of 33x is higher than Intel’s 12x, but lower than the 47x for AMD.
  • AMD’s high P/E Multiple can be attributed to the expected strong growth from the company. Its current share in the data center market is in low single-digits, thereby leaving huge upside potential with its EPYC processors.
  • Intel’s P/E Multiple has been lower historically. In fact, over the last 15 years it has been in the range of 7x to 17x.
  • Nvidia’s higher P/E Multiple when compared to that of Intel or even the broader S&P 500 index, can be attributed to its strong balance sheet with net cash of $6.5 billion.

Nvidia’s Revenue Grew At A Faster Pace Over The Last Three Years, When Compared To Intel And AMD.

  • Nvidia’s revenues grew at an average annual rate of 33% over the last three fiscals.
  • This compares with average annual growth rate of 18% for AMD, and 9% for Intel.
  • The growth in Nvidia’s revenue in 2017 and 2018 was fueled by its foray into the data center business, and launch of Pascal architecture GPUs.

Nvidia’s EBITDA Margin Is Higher Than That of AMD But Lower Than That of Intel.

  • Nvidia’s EBITDA Margin grew from 34.3% in fiscal 2017 to 39.5% in fiscal 2019.
  • This compares with Intel’s EBITDA Margin, which grew from 37.4% in 2016 to 48.1% in 2018.
  • AMD’s EBITDA Margin grew from 4.1% in 2016 to 12.4% in 2018.
  • Intel’s EBITDA margins are much higher than AMD and Nvidia’s due to its lower spend on R&D, and SG&A, as a percentage of its revenues, which is the highest for AMD, and hence impacting its margins.

Nvidia’s Net Income Margin Is 4x Higher Than AMD’s And 6x Higher Than That of Intel.

  • Nvidia’s Net Income Margin is much higher than that of Intel and AMD.
  • Nvidia’s Net Income Margin grew from 32.1% in fiscal 2017 to 37.6% in fiscal 2019.
  • The 37.6% figure of Nvidia was 4x higher than the 9.8% figure for AMD, and 6x higher than the 6.5% figure for Intel in 2018.
  • Intel’s net income margin is lower than that of AMD and Nvidia, due to its comparatively higher effective tax rate.

 

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