DCF Studio

    NVDA · NMS · Technology

    NVIDIA Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 166.14

    Market price

    USD 222.27

    Implied upside

    -25.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 3.5% of revenue against depreciation of 2.7%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 39.9x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 166.14-25.3%
    Exit multiple
    USD 416.86+87.5%
    Market price
    USD 222.27

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn309bn617bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 323.9bnUSD 485.9bnUSD 728.8bnUSD 1093.2bnUSD 1639.8bn+50.0%
    EBITUSD 160.0bnUSD 240.0bnUSD 360.0bnUSD 540.0bnUSD 810.0bn+50.0%
    NOPATUSD 138.8bnUSD 208.2bnUSD 312.3bnUSD 468.4bnUSD 702.6bn+50.0%
    Add depreciation & amortisationUSD 8.9bnUSD 13.3bnUSD 19.9bnUSD 29.9bnUSD 44.9bn+50.0%
    Less capital expenditureUSD -11.2bnUSD -16.8bnUSD -25.2bnUSD -37.8bnUSD -56.7bn+50.0%
    Less increase in working capitalUSD -14.6bnUSD -21.8bnUSD -32.8bnUSD -49.1bnUSD -73.7bn+50.0%
    Free cashflow to firmUSD 121.9bnUSD 182.8bnUSD 274.2bnUSD 411.4bnUSD 617.0bn+50.0%
    Discount factor0.93270.81130.70570.61390.5340-
    Present valueUSD 113.7bnUSD 148.3bnUSD 193.5bnUSD 252.5bnUSD 329.5bn+30.5%
    Present Value Of The ForecastUSD 1037.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.815Reported 2.217, pulled toward 1.0 (Blume)
    Cost of equity14.98%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 5367.2bn99.8% of capital
    Total debtUSD 11.0bn0.2% of capital, book value as a proxy
    Tax rate13.3%Effective, capped at statutory
    WACC14.96%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 166.14

    74% of EV

    Forecast FCFF, final year
    USD 617.0bn
    Capex at depreciation, working capital in reinvestment
    USD 708.8bn
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    USD -29.5bn
    Capitalised
    USD 679.3bn
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    USD 5587.5bn
    Terminal value, discounted
    USD 2983.6bn
    Enterprise value
    USD 4021.2bn
    Less net debt
    USD -51.5bn
    Equity value
    USD 4072.7bn

    Exit at 20.0x EBITDA

    Value per shareUSD 416.86

    90% of EV

    Terminal value, undiscounted
    USD 17097.7bn
    Terminal value, discounted
    USD 9129.9bn
    Enterprise value
    USD 10167.4bn
    Less net debt
    USD -51.5bn
    Equity value
    USD 10218.9bn

    Spread between methods: 86%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    12.96%191.01197.04203.63210.87218.86
    13.96%173.10177.94183.20188.92195.18
    14.96%157.94161.88166.14170.74175.72
    15.96%144.96148.21151.70155.45159.48
    16.96%133.74136.45139.34142.42145.73

    Outlined: this model. Green text: above today's price of 222.27. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year50.0%59.9%+9.9pp
    EBIT margin49.4%65.8%+16.4pp
    Discount rate15.0%12.2%-2.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.