In today’s rapidly evolving and fiercely competitive business landscape, it is crucial for investors and industry analysts to conduct comprehensive company evaluations. In this article, we will undertake an in-depth industry comparison, assessing NVIDIA (NASDAQ:NVDA) alongside its primary competitors in the Semiconductors & Semiconductor Equipment industry. By meticulously examining crucial financial indicators, market positioning, and growth potential, we aim to provide valuable insights to investors and shed light on company’s performance within 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 to run large language models. 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 | 53.34 | 45.53 | 27.94 | 28.72% | $31.94 | $33.85 | 55.6% |
| Broadcom Inc | 85.48 | 21.49 | 26.91 | 5.8% | $8.29 | $10.7 | 22.03% |
| Taiwan Semiconductor Manufacturing Co Ltd | 31.57 | 9.96 | 13.41 | 8.71% | $684.78 | $547.37 | 38.65% |
| Advanced Micro Devices Inc | 98.21 | 4.46 | 9.04 | 1.48% | $0.72 | $3.06 | 31.71% |
| Micron Technology Inc | 24 | 3.76 | 5.48 | 6.1% | $4.33 | $3.51 | 21.65% |
| Qualcomm Inc | 16.07 | 6.60 | 4.30 | 9.71% | $3.52 | $5.76 | 10.35% |
| Texas Instruments Inc | 32.98 | 10 | 9.92 | 7.85% | $2.09 | $2.58 | 16.38% |
| ARM Holdings PLC | 227.85 | 22.73 | 38.84 | 1.88% | $0.17 | $1.02 | 12.14% |
| Analog Devices Inc | 60.89 | 3.45 | 11.47 | 1.5% | $1.33 | $1.79 | 24.57% |
| NXP Semiconductors NV | 26.81 | 5.93 | 4.74 | 4.71% | $0.92 | $1.56 | -6.43% |
| Monolithic Power Systems Inc | 23.96 | 12.89 | 17.42 | 4.01% | $0.18 | $0.37 | 30.97% |
| STMicroelectronics NV | 60.34 | 1.35 | 2.24 | -0.05% | $0.62 | $0.65 | -14.42% |
| Credo Technology Group Holding Ltd | 201.26 | 32.08 | 44.92 | 8.67% | $0.07 | $0.15 | 273.57% |
| ASE Technology Holding Co Ltd | 22.56 | 2.51 | 1.20 | 2.49% | $26.99 | $25.69 | 7.5% |
| First Solar Inc | 19.22 | 2.82 | 5.56 | 4.09% | $0.49 | $0.5 | 8.58% |
| ON Semiconductor Corp | 46.05 | 2.49 | 3.21 | 2.13% | $0.38 | $0.55 | -15.36% |
| United Microelectronics Corp | 13.53 | 1.68 | 2.35 | 2.45% | $24.98 | $16.88 | 3.45% |
| Skyworks Solutions Inc | 30.41 | 2 | 3.01 | 1.81% | $0.23 | $0.4 | 6.57% |
| Rambus Inc | 48.88 | 9.04 | 17.34 | 4.85% | $0.08 | $0.14 | 30.33% |
| Lattice Semiconductor Corp | 320 | 14.66 | 20.77 | 0.42% | $0.02 | $0.08 | -0.08% |
| Average | 73.16 | 8.94 | 12.74 | 4.14% | $40.01 | $32.78 | 26.43% |
Through an analysis of NVIDIA, we can infer the following trends:
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The Price to Earnings ratio of 53.34 is 0.73x lower than the industry average, indicating potential undervaluation for the stock.
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The elevated Price to Book ratio of 45.53 relative to the industry average by 5.09x suggests company might be overvalued based on its book value.
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With a relatively high Price to Sales ratio of 27.94, which is 2.19x the industry average, the stock might be considered overvalued based on sales performance.
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With a Return on Equity (ROE) of 28.72% that is 24.58% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $31.94 Billion is 0.8x below the industry average, suggesting potential lower profitability or financial challenges.
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Compared to its industry, the company has higher gross profit of $33.85 Billion, which indicates 1.03x above the industry average, indicating stronger profitability and higher earnings from its core operations.
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The company is experiencing remarkable revenue growth, with a rate of 55.6%, outperforming the industry average of 26.43%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio assesses the extent to which a company relies on borrowed funds compared to its equity.
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.
By analyzing NVIDIA in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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When considering the debt-to-equity ratio, NVIDIA exhibits a stronger financial position compared to its top 4 peers.
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This indicates that the company has a favorable balance between debt and equity, with a lower debt-to-equity ratio of 0.11, which can be perceived as a positive aspect by investors.
Key Takeaways
The low PE ratio suggests NVIDIA is undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, the high PB and PS ratios indicate that the market values the company’s assets and sales more highly. On the other hand, the high ROE, gross profit, and revenue growth highlight NVIDIA’s strong profitability and growth potential, outperforming its industry peers. The low EBITDA may indicate some challenges in operational efficiency.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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