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 | 52.73 | 49.64 | 29.32 | 31.13% | $22.86 | $26.16 | 93.61% |
| Broadcom Inc | 182.20 | 16.28 | 21.77 | 6.49% | $7.29 | $9.0 | 51.2% |
| Taiwan Semiconductor Manufacturing Co Ltd | 30.21 | 8.26 | 12.25 | 9.05% | $596.09 | $512.38 | 38.84% |
| Qualcomm Inc | 18.49 | 7.05 | 4.75 | 11.46% | $3.21 | $5.78 | 18.69% |
| Advanced Micro Devices Inc | 110.48 | 3.11 | 7.01 | 1.36% | $1.55 | $3.42 | 17.57% |
| ARM Holdings PLC | 211.63 | 26.41 | 46.20 | 1.83% | $0.11 | $0.81 | 4.71% |
| Texas Instruments Inc | 34.67 | 9.73 | 10.59 | 7.05% | $2.09 | $2.47 | -3.47% |
| Micron Technology Inc | 27.49 | 2.28 | 3.70 | 4.07% | $4.3 | $3.35 | 84.28% |
| Analog Devices Inc | 62.46 | 2.89 | 10.84 | 1.36% | $1.12 | $1.42 | -10.06% |
| Monolithic Power Systems Inc | 19.28 | 10.72 | 15.61 | 6.35% | $0.17 | $0.34 | 30.59% |
| Microchip Technology Inc | 91.32 | 4.64 | 5.94 | 1.24% | $0.34 | $0.67 | -48.37% |
| ASE Technology Holding Co Ltd | 20.70 | 2.37 | 1.25 | 3.16% | $28.59 | $26.43 | 3.85% |
| STMicroelectronics NV | 13.57 | 1.16 | 1.59 | 1.95% | $0.74 | $1.23 | 2.15% |
| ON Semiconductor Corp | 12.96 | 2.25 | 2.87 | 4.75% | $0.63 | $0.8 | -19.21% |
| First Solar Inc | 14.03 | 2.30 | 4.55 | 4.22% | $0.45 | $0.45 | 10.81% |
| United Microelectronics Corp | 9.75 | 1.37 | 2.19 | 4.0% | $29.73 | $20.43 | 5.99% |
| Skyworks Solutions Inc | 19.89 | 1.62 | 2.58 | 0.95% | $0.18 | $0.43 | -15.9% |
| Lattice Semiconductor Corp | 123.80 | 10.57 | 14.79 | 1.03% | $0.03 | $0.09 | -33.87% |
| Qorvo Inc | 275.93 | 2.13 | 1.96 | 1.22% | $0.14 | $0.39 | -14.67% |
| Rambus Inc | 40.71 | 6.39 | 13.16 | 5.76% | $0.07 | $0.12 | 10.71% |
| Average | 69.45 | 6.4 | 9.66 | 4.07% | $35.62 | $31.05 | 7.04% |
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After a detailed analysis of NVIDIA, the following trends become apparent:
With a Price to Earnings ratio of 52.73, which is 0.76x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
The elevated Price to Book ratio of 49.64 relative to the industry average by 7.76x suggests company might be overvalued based on its book value.
The Price to Sales ratio of 29.32, which is 3.04x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
The Return on Equity (ROE) of 31.13% is 27.06% above the industry average, highlighting efficient use of equity to generate profits.
With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $22.86 Billion, which is 0.64x below the industry average, the company may face lower profitability or financial challenges.
The gross profit of $26.16 Billion is 0.84x below that of its industry, suggesting potential lower revenue after accounting for production costs.
The company is experiencing remarkable revenue growth, with a rate of 93.61%, outperforming the industry average of 7.04%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.
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 considering the Debt-to-Equity ratio, NVIDIA can be compared to its top 4 peers, leading to the following observations:
NVIDIA has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.16.
This suggests that the company has a more favorable balance between debt and equity, which can be perceived as a positive indicator 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 top-line 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.
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