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Wall Street JournalCompetitor Analysis: Evaluating NVIDIA And Competitors In Semiconductors & Semiconductor Equipment Industry
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 | 47.71 | 43.02 | 24.63 | 23.01% | $22.58 | $26.67 | 69.18% |
| Broadcom Inc | 96.27 | 17.83 | 22.33 | 7.12% | $8.02 | $10.2 | 20.16% |
| Taiwan Semiconductor Manufacturing Co Ltd | 26.07 | 7.39 | 10.74 | 8.19% | $608.71 | $493.4 | 41.61% |
| Advanced Micro Devices Inc | 101.04 | 3.88 | 8.15 | 1.23% | $1.59 | $3.74 | 35.9% |
| Texas Instruments Inc | 38.98 | 11.40 | 11.78 | 7.08% | $1.85 | $2.31 | 11.14% |
| Qualcomm Inc | 15.89 | 6.17 | 4.14 | 10.3% | $3.67 | $6.04 | 16.93% |
| ARM Holdings PLC | 208.55 | 24.23 | 41.49 | 3.17% | $0.46 | $1.21 | 33.73% |
| Micron Technology Inc | 30.60 | 2.94 | 4.61 | 3.32% | $3.95 | $2.96 | 38.27% |
| Analog Devices Inc | 63.85 | 3.33 | 11.93 | 1.63% | $1.2 | $1.61 | 22.28% |
| Monolithic Power Systems Inc | 19.11 | 10.50 | 14.59 | 4.17% | $0.18 | $0.35 | 39.24% |
| STMicroelectronics NV | 25.57 | 1.52 | 2.29 | 0.32% | $0.51 | $0.84 | -27.36% |
| ASE Technology Holding Co Ltd | 20.70 | 2.19 | 1.13 | 2.39% | $27.16 | $24.89 | 11.56% |
| ON Semiconductor Corp | 37.65 | 2.82 | 3.49 | -5.78% | $-0.37 | $0.29 | -22.39% |
| United Microelectronics Corp | 12.51 | 1.50 | 2.45 | 2.06% | $23.86 | $15.45 | 5.91% |
| First Solar Inc | 12.84 | 1.98 | 3.82 | 2.59% | $0.35 | $0.34 | 6.35% |
| Credo Technology Group Holding Ltd | 316.97 | 22.90 | 38.12 | 5.63% | $0.03 | $0.09 | 25.94% |
| Skyworks Solutions Inc | 28.68 | 1.86 | 2.99 | 1.11% | $0.22 | $0.39 | -8.87% |
| Qorvo Inc | 140.67 | 2.24 | 2.09 | 0.93% | $0.11 | $0.37 | -7.6% |
| Universal Display Corp | 32.37 | 4.46 | 11.44 | 3.93% | $0.08 | $0.13 | 0.62% |
| Lattice Semiconductor Corp | 138.24 | 9.94 | 14.46 | 0.71% | $0.02 | $0.08 | -14.68% |
| Average | 71.92 | 7.32 | 11.16 | 3.16% | $35.87 | $29.72 | 12.04% |
Through a thorough examination of NVIDIA, we can discern the following trends:
With a Price to Earnings ratio of 47.71, which is 0.66x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
With a Price to Book ratio of 43.02, which is 5.88x the industry average, NVIDIA might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
The stock's relatively high Price to Sales ratio of 24.63, surpassing the industry average by 2.21x, may indicate an aspect of overvaluation in terms of sales performance.
The Return on Equity (ROE) of 23.01% is 19.85% above the industry average, highlighting efficient use of equity to generate profits.
The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $22.58 Billion is 0.63x below the industry average, suggesting potential lower profitability or financial challenges.
With lower gross profit of $26.67 Billion, which indicates 0.9x below the industry average, the company may experience lower revenue after accounting for production costs.
The company is experiencing remarkable revenue growth, with a rate of 69.18%, outperforming the industry average of 12.04%.
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:
In terms of the debt-to-equity ratio, NVIDIA has a lower level of debt compared to its top 4 peers, indicating a stronger financial position.
This implies that the company relies less on debt financing and has a more favorable balance between debt and equity with a lower debt-to-equity ratio of 0.12.
Key Takeaways
The low P/E ratio suggests that NVIDIA may be undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, the high P/B and P/S ratios indicate that the stock may be overvalued based on its book value and sales. On the other hand, the high ROE, low EBITDA, low gross profit, and high revenue growth suggest that NVIDIA is performing well in terms of profitability and growth compared to its industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.