In the dynamic and fiercely competitive business environment, conducting a thorough analysis of companies is crucial for investors and industry enthusiasts. In this article, we will perform an extensive industry comparison, evaluating NVIDIA (NASDAQ:NVDA) in relation to its major competitors in the Semiconductors & Semiconductor Equipment industry. By closely examining crucial financial metrics, market position, and growth prospects, we aim to offer valuable insights for 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 | 44.01 | 36.35 | 23.36 | 28.72% | $31.94 | $33.85 | 55.6% |
| Broadcom Inc | 98.73 | 24.81 | 31.08 | 5.8% | $8.29 | $10.7 | 22.03% |
| Taiwan Semiconductor Manufacturing Co Ltd | 29.54 | 9.29 | 12.79 | 9.44% | $691.11 | $588.54 | 30.31% |
| Advanced Micro Devices Inc | 107.92 | 5.52 | 10.51 | 2.06% | $2.11 | $4.78 | 35.59% |
| Micron Technology Inc | 29.58 | 4.65 | 6.76 | 6.1% | $5.9 | $5.05 | 46.0% |
| Qualcomm Inc | 32.59 | 8.25 | 4.07 | -12.88% | $3.51 | $6.24 | 10.03% |
| Intel Corp | 597.17 | 1.61 | 2.95 | 3.98% | $7.85 | $5.22 | 2.78% |
| Texas Instruments Inc | 29.47 | 8.84 | 8.58 | 8.21% | $2.24 | $2.72 | 14.24% |
| ARM Holdings PLC | 168.51 | 18.83 | 31.76 | 3.3% | $0.22 | $1.11 | 34.48% |
| Analog Devices Inc | 55.27 | 3.65 | 11.36 | 1.5% | $1.33 | $1.79 | 24.57% |
| NXP Semiconductors NV | 23.61 | 4.79 | 4.04 | 6.43% | $1.11 | $1.79 | -2.37% |
| Monolithic Power Systems Inc | 23.31 | 12.20 | 16.44 | 5.12% | $0.21 | $0.41 | 18.88% |
| ASE Technology Holding Co Ltd | 28.78 | 3.07 | 1.56 | 3.56% | $32.4 | $28.88 | 5.29% |
| First Solar Inc | 19.98 | 3.10 | 5.54 | 5.19% | $0.61 | $0.61 | 79.67% |
| Credo Technology Group Holding Ltd | 214.14 | 34.14 | 47.79 | 8.67% | $0.07 | $0.15 | 273.57% |
| ON Semiconductor Corp | 66.18 | 2.46 | 3.26 | 3.22% | $0.38 | $0.55 | 5.6% |
| STMicroelectronics NV | 38.72 | 1.12 | 1.77 | 1.33% | $0.31 | $1.06 | -1.97% |
| United Microelectronics Corp | 13.53 | 1.59 | 2.39 | 4.29% | $30.07 | $17.62 | -2.25% |
| Tower Semiconductor Ltd | 56.65 | 3.86 | 7.34 | 1.9% | $0.13 | $0.09 | 6.79% |
| Rambus Inc | 44.02 | 7.72 | 14.82 | 3.84% | $0.08 | $0.14 | 22.68% |
| Skyworks Solutions Inc | 20.62 | 1.64 | 2.41 | 2.48% | $0.25 | $0.45 | 7.34% |
| Average | 84.92 | 8.06 | 11.36 | 3.68% | $39.41 | $33.89 | 31.66% |
Upon closer analysis of NVIDIA, the following trends become apparent:
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The Price to Earnings ratio of 44.01 is 0.52x lower than the industry average, indicating potential undervaluation for the stock.
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The elevated Price to Book ratio of 36.35 relative to the industry average by 4.51x suggests company might be overvalued based on its book value.
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The Price to Sales ratio of 23.36, which is 2.06x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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With a Return on Equity (ROE) of 28.72% that is 25.04% 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 0.81x below the industry average, suggesting potential lower profitability or financial challenges.
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The gross profit of $33.85 Billion is 1.0x below that of its industry, suggesting potential lower revenue after accounting for production costs.
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With a revenue growth of 55.6%, which surpasses the industry average of 31.66%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio measures the financial leverage of a company by evaluating its debt relative 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.
When assessing NVIDIA against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
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NVIDIA demonstrates a stronger financial position compared to its top 4 peers in the sector.
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With a lower debt-to-equity ratio of 0.11, the company relies less on debt financing and maintains a healthier balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
The low P/E ratio suggests NVIDIA is undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, the high P/B and P/S ratios indicate that the market values the company's assets and sales more favorably. On the other hand, the high ROE and revenue growth, along with low EBITDA and gross profit, may indicate potential for strong future performance but also operational challenges that need to be addressed.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
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