Semiconductors obviously haven't had a great 52 weeks as the Philadelphia Semiconductor Index is down just under 10% for the time period. NVIDIA (NVDA) has had an even worse 52 weeks, falling 25% over the time period. In general, the stock has had a tough time since the credit crisis. After trading over $35 a share in 2007, the stock fell to below $10 a share in late 2008 and has only climbed just above $25 at its highest point.
The valuation metrics are mixed on the company as the trailing valuation metrics strongly suggest that the stock is undervalued while analysts and the forward P/E ratio disagree. Although the valuation is up for debate, the company is in a strong financial position and had over $3 billion in cash at the end of January. That is over 30% of the market cap. With the stock so dependent on the PC market, at this point, it seems too early to take a shot as NVDA as there is no clear upcoming catalyst. Below is an overview of the valuation metrics and the chart.
Valuation: NVIDIA's trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. NVIDIA's current P/B ratio is 2.2 and it has averaged 3.5 over the past 5 years with a high of 7.8 and low of 1.8. NVIDIA's current P/S ratio is 2.3 and it has averaged 2.6 over the past 5 years with a high of 5.1 and low of 1.2. NVIDIA's current P/E ratio is 15.8 and it has averaged 25.6 over the past 5 years with a high of 55.6 and low of 13.
Price Target: The consensus price target for the analysts who follow NVIDIA is $17. That is upside of 15% from today's stock price of $14.81 and suggests that the stock is fairly valued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: NVIDIA is currently trading at about $15 a share with analysts expecting EPS of $0.92 next year, an earnings increase of 31% y/y, for a forward P/E ratio of 16.1. Taking a look at other publically traded tech stocks will give us a better idea of the stock's relative valuation. AMD (AMD) is currently trading at about $7 a share with analysts expecting EPS of $0.81 next year, an earnings increase of 25% y/y, for a forward P/E ratio of 8.9.
Broadcom (BRCM) is currently trading at about $35 a share with analysts expecting EPS of $3.25 next year, an earnings increase of 11% y/y, for a forward P/E ratio of 10.8. Intel (INTC) is currently trading at about $27 a share with analysts expecting EPS of $2.62 next year, an earnings increase of 8% y/y, for a forward P/E ratio of 10.3. The mean forward P/E of NVIDIA's competitors is 10 which suggests that NVIDIA is overvalued relative to its publically traded competitors.
Earnings Estimates: NVIDIA has beat EPS estimates 2 times in the past 4 quarters. The company's EPS figures have come in between 0 cents and 3 cents from consensus estimates or about 0% to 15.8% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a decent margin which suggests that the stock may experience upside from earnings surprises.
Price Action: NVIDIA is down 28.1% over the past year, underperforming the S&P 500, which is up 4.5%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $14.99 and above its 200 day moving average, which sits at $14.82.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
