Ratio Analysis Report on Nvidia Josh Chester This report was constructed using data primarily from the fiscal year 2021 I am going to cover several financial ratios in this report to show how Nvidia i.
Ratio Analysis Report on Nvidia- Josh Chester This report was constructed using data primarily from the fiscal year 2021 I am going to cover several financial ratios in this report to show how Nvidia is performing internally as well against external competitors Also please note all numbers used for calculations are in thousands Short-Term solvency, or liquidity ratios Current Ratio= Quick Ratio= Current Assets 16,055,000.00 Current Liabilities 3,925,000.00 Current Assets- Inventory 14,229,000.00 Current Liabilities 3,925,000.00 Cash Cash Ratio= Current Liabilities 4.09044586 3.62522293 847,000.00 3,925,000.00 0.2157961783 The current ratio shows that the company has no issues meeting their short term obligations The company has plenty of assets and inventory compared to their current liabilities Their cash ratio could be a problem Nvidia showed a 19,675,000 loss in investing cash flow of 2021 This was compared to a positive investing cash flow of 6,145,000 in 2020 Luckily their free cash flow ended at 4,694,000 for the year so this number is not as alarming as it could be This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:49 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ Long-term Solvency or financial leverage ratios Total Debt Ratio= Debt-equity ratio= Equity multiplier= Times interest earned ratio= Total assets- Total equity 11,898,000.00 Total assets 28,791,000.00 Total Debt 7,718,000.00 Total equity 16,893,000.00 Total assets 28,791,000.00 Total Equity 16,893,000.00 EBIT 5,684,000.00 Interest Ebit + Depreciation Cash coverage Ratio= Interest 212,000.00 0.4132541419 0.456875629 1.704315397 26.81132075 7,092,000.00 212,000.00 33.45283019 Checking the total debt ratio, which shows how well the company can pay it’s liabilities with its assets Nvidia uses about 42 percent debt to finance long term activities Looking at the equity multiplier we are able to see that Nvidia has 1.70 times the amount of assets versus the equity held by shareholders The high times interest earned and cash coverage ratio go back to how well Nvidia is able to convert its free cash flow to finance their operations This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:49 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ Asset utilization or turnover ratios Inventory turnover= Days sales in inventory= Receivables turnover= Cost of goods sold 6,279,000.00 Inventory 1,826,000.00 365 days 365.00 Inventory Turnover 1,032,250.00 Sales 16,675,000.00 Accounts Receivables 2,429,000.00 365 days Days sales in Receivables Total asset turnover= Capital Intensity= 365.00 Receivables turnovers 2,043,000.00 Sales 16,675,000.00 Total Assets 28,791,000.00 Total Assets 28,791,000.00 Sales 16,675,000.00 3.438663746 0.0003535965125 6.864965006 0.000178658835 0.5791740474 1.726596702 Nvidia asset turnover is pretty low compared to the amount of assets they have to sales.This states that for every $1 in assets, Nvidia only generates $.58 in revenue This is pretty close to Qualcomm, one of their competitors, who has a total asset turnover of 66 AMD, the newcomer to the market, is making the most of their assets with a ratio of 1.27 This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:50 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ 4,332,000.00 ROE= 16,675,000.00 28,791,000.00 16,675,000.00 28,791,000.00 16,893,000.00 0.2564375777 Profitability Ratios Net income Profit Margin=- sales Net income Return on assets (ROA)= Total Assets Net Income Return on equity (ROE) Total Equity 4,332,000.00 25.98% 16,675,000.00 4,332,000.00 15.05% 28,791,000.00 4,332,000.00 25.64% 16,893,000.00 While Nvidia’s competitors tend to make better use of their assets, Nvidia is still right on par with profit margin with Qualcomm and AMD AMD has a 25.24% and Qualcomm has a 22.09% profit margin Market Value Ratios Price-Earnings ratio= Market-to-book ratio= Price per share $ 802.01 Earnings per share 7.02 Market Value per share $ 802.01 Book value per share 30.14 This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:50 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ 114.2464387 26.60948905 Nvidia historical ROE’s Historical ROE's EBIT MARGIN INTEREST BURDEN TAX ASSET BURDEN TURNOVER LEVER AGE ROE NVIDIA 2020 0.2768 0.9828 0.9414 0.6306 1.4188 0.2291 NVIDIA 2019 0.3375 0.9853 1.0629 0.8814 1.4228 0.4433 NVIDIA 2018 0.3353 0.9813 0.9534 0.8642 1.5046 0.4078 NVIDIA 2020 2019 2018 EBIT 3,022,000.00 3,954,000.00 3,257,000.00 EBT 2,970,000.00 3,896,000.00 3,196,000.00 10,918,000.00 11,716,000.00 9,714,000.00 2,796,000.00 4,141,000.00 3,047,000.00 SALES 10,918,000.00 11,716,000.00 9,714,000.00 TOTAL ASSETS 17,315,000.00 13,292,000.00 11,241,000.00 TOTAL STOCKHOLDERS EQUITY 12,204,000.00 NET REVENUE NET INCOME 9,342,000.00 7,471,000.00 Nvidia is starting to struggle with their ROE starting in 2020 It was cut in half versus the two previous years 2020 and 2019 They are also behind their competitors by a big margin Both of their competitors produced ROE’s in the high 80’s versus their ROE of 23 percent Nvidia has to get their operating costs under control in order to continue with their huge sales success AMD Historical ROE’s Historical ROE's EBIT MARGIN INTEREST BURDEN TAX ASSET BURDEN TURNOVER LEVER AGE ROE AMD 2020 0.1354 0.9644 1.9529 1.0894 3.1701 0.8808 AMD 2019 0.0692 0.7983 0.9167 1.1166 4.7615 0.2694 AMD 2018 0.0697 0.7317 1.0212 1.4212 7.4566 0.5516 AMD 2020 2019 2018 EBIT 1,322,000.00 466,000.00 451,000.00 This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:50 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ EBT 1,275,000.00 372,000.00 330,000.00 NET REVENUE 9,763,000.00 6,731,000.00 6,475,000.00 NET INCOME 2,490,000.00 341,000.00 337,000.00 SALES 9,763,000.00 6,731,000.00 6,475,000.00 TOTAL ASSETS 8,962,000.00 6,028,000.00 4,556,000.00 TOTAL STOCKHOLDERS EQUITY 2,827,000.00 1,266,000.00 611,000.00 AMD has seen great growth and margins in the last year after seeing many years of a loss They were able to jump their sales by 50% while keeping their operating costs down This resulted in a growth of their ROE by 62% year over year Qualcomm Historical ROE’s Historical ROE's EBIT MARGIN INTEREST BURDEN TAX ASSET BURDEN TURNOVER LEVER AGE ROE QUALCOMM 2020 0.2686 0.9048 0.9089 0.6611 5.8572 0.8554 QUALCOMM 2019 0.3340 0.9227 0.5863 0.7365 6.7136 0.8935 QUALCOMM 2018 0.0564 0.4005 -9.4815 0.6955 35.2220 -5.2414 QUALCOMM 2020 2019 2018 EBIT 6,321,000.00 8,108,000.00 1,281,000.00 EBT 5,719,000.00 7,481,000.00 513,000.00 NET REVENUE 23,531,000.00 24,273,000.00 22,732,000.00 5,198,000.00 4,386,000.00 -4,864,000.00 SALES 23,531,000.00 24,273,000.00 22,732,000.00 TOTAL ASSETS 35,594,000.00 32,957,000.00 32,686,000.00 NET INCOME TOTAL STOCKHOLDERS EQUITY 6,077,000.00 4,909,000.00 928,000.00 Qualcomm had a terrible year in 2018 They had to make a massive tax payment that put them under for the year They rebounded with a fantastic 2019 and kept the momentum going into 2020 If it wasn't for that tax payment, qualcomm would have a consistent ROE in the 80’s This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:50 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ Common sized income statement 2020 2019 2018 Total Revenue 10,918,000 % Revenue 11,716,000 % Revenue 9,714,000 % Revenue Cost of revenue 4,150,000 38% 4,545,000 39% 3,892,000 40% Gross Profit 6,768,000 62% 7,171,000 61% 5,822,000 60% Operating Expense 3,922,000 36% 3,367,000 29% 2,612,000 27% Operating Income 2,846,000 26% 3,804,000 32% 3,210,000 33% Other income expense -2,000 0% 14,000 0% -22,000 0% EBT 2,970,000.0 27% 3,896,000.0 33% 3,196,000.0 33% Net Income from Continuing 2,796,000 26% 4,141,000 35% 3,047,000 31% Interest Expense 52,000 0% 58,000 0% 61,000 1% EBIT 3,022,000 28% 3,954,000 34% 3,257,000 34% Net Income 2,796,000 26% 4,141,000 35% 3,047,000 31% Free Cash Flow 5,516,000 51% 3,143,000 27% 2,909,000 30% EPS 4.59 6.81 Forecasting for Nvidia: This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:50 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ 5.09 2023 2022 2021 Total Revenue 41,000,000 % Revenue 31,500,000 % Revenue 16,675,000 Cost of revenue 15,990,000 39.00% 12,285,000 39.00% 6,279,000 Gross Profit 18,450,000 45.00% 14,175,000 45.00% 6,768,000 Operating Expense 14,760,000 36.00% 11,340,000 36.00% 5,864,000 Operating Income 11,890,000 29.00% 9,135,000 29.00% 4,532,000 Other income expense 8,200 0.02% 6,300 0.02% 4,000 EBT 10,250,000.00 25.00% 7,875,000 25.00% 4,409,000 Net Income from Continuing 10,660,000 26.00% 8,190,000 26.00% 4,332,000 Interest Expense 902,000 2.20% 693,000 2.20% 184,000 EBIT 11,275,000 27.50% 8,662,500 27.50% 4,593,000 Net Income 10,660,000 26.00% 8,190,000 26.00% 4,332,000 Free Cash Flow 11,480,000 28.00% 8,820,000 28.00% 4,694,000 EPS 19.14 15 This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:50 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ 7.02 Nvidia is going through an explosive growth through 2021 into 2022 due to the crypto boom Nvidia’s products are king in the crypto mining world and you can't even get your hands on their GPU’s right now I based 2022 off the sales to the month on yahoo finance Through months, Nvidia has already surpassed previous years revenue They are on track to double from 2020 I used the average revenue percentages to create the forecasted for the rest of this year through 2023 It seems Nvidia will continue to be the leader in chips and GPU’s while the computer market is on fire due to crypto and PC gaming The main challenge they will face is getting parts during this chip shortage This will cause their cost of goods to increase substantially affecting their bottom line for the foreseeable future This study source was downloaded by 100000813775265 from CourseHero.com on 01-19-2023 10:56:50 GMT -06:00 https://www.coursehero.com/file/118143551/Ratio-Analysis-Report-on-Nvidia-Josh-Chesterdocx/ Powered by TCPDF (www.tcpdf.org)