NVIDIA CORP (NVDA) Stock Analysis
NVIDIA CORP (NVDA) Stock Analysis
Overall Grade: F (Concerning)
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NVIDIA CORP faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 97.3% | Above industry average |
| FCF Margin | 44.8% | Strong cash generation |
| Debt/Equity | 0.1x | Conservative leverage |
Investment Thesis: Strong return on invested capital of 97.3% suggests durable competitive advantages and efficient capital allocation.
What is NVIDIA CORP's Profitability and ROIC?
NVIDIA CORP generates strong returns on invested capital at 97.3%, indicating efficient capital allocation and competitive advantages. Gross margin of 71.1% with operating margin at 60.4% reflects the company's strong market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 97.3% | Excellent | Strong capital efficiency |
| Return on Equity (ROE) | 114.0% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 71.1% | Excellent | Strong pricing power |
| Operating Margin | 60.4% | Excellent | Efficient operations |
How Strong is NVIDIA CORP's Cash Flow Quality?
NVIDIA CORP generated $96.7B in free cash flow over the trailing twelve months, representing a 44.8% margin. FCF was positive in N/A of the last 8 quarters, indicating variable cash generation.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 44.8% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $96.7B | Good | Positive cash generation |
| OCF/Net Income | 0.9x | Good | Potential accrual concerns |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is NVIDIA CORP's Financial Health?
NVIDIA CORP maintains a net cash position of $2.1B, providing significant financial flexibility.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.1x | Excellent | Conservative capital structure |
| Net Cash Position | $2.1B | Excellent | Net cash positive |
Is NVIDIA CORP Stock Overvalued or Undervalued?
NVIDIA CORP trades at a P/E of 38.1x, representing a premium to the sector median of N/A. Free cash flow yield of 2.1% reflects market expectations for growth.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 38.1x | Adequate | Premium valuation |
| EV/Sales | 21.0x | Warning | Growth premium priced in |
| FCF Yield | 2.1% | Adequate | Lower cash yield |
| Dividend Yield | 0.0% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 97.3% | Top 5% | 15.1x above |
| Free Cash Flow Margin | 44.8% | Top 5% | 4.5x above |
| Gross Margin | 71.1% | Top 50% | 1.3x above |
| Operating Margin | 60.4% | Top 5% | 9.6x above |
| Return on Equity (ROE) | 114.0% | Top 5% | 18.3x above |
| P/E Ratio | 38.1x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 97.3% (Excellent - Top 5% of sector (median: 6.5%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 44.8% (Excellent - Top 5% of sector (median: 10.0%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 71.1% (Excellent - Top 50% of sector (median: 52.9%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 5.4% (Excellent)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 38.1x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 2.1% (Warning)
Frequently Asked Questions
Q: What is NVIDIA CORP's Return on Invested Capital (ROIC)?
NVIDIA CORP (NVDA) has a trailing twelve-month Return on Invested Capital (ROIC) of 97.3%. This compares above the sector median of 6.5%. An ROIC above 20% indicates exceptional capital efficiency and strong competitive advantages.
Q: What is NVIDIA CORP's Free Cash Flow Margin?
NVIDIA CORP (NVDA) has a free cash flow margin of 44.8%, generating $96.7 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is NVIDIA CORP stock overvalued or undervalued?
NVIDIA CORP (NVDA) trades at a P/E ratio of 38.1x, which is above the sector median of N/A. The EV/Sales multiple is 21.0x. Free cash flow yield is 2.1%, reflecting growth expectations priced into the stock.
Q: Does NVIDIA CORP pay a dividend?
NVIDIA CORP (NVDA) currently pays a dividend yield of 0.0%. Including share buybacks, the total shareholder yield is 0.9%. The relatively low yield suggests the company prioritizes growth reinvestment over income distribution.
Q: What is NVIDIA CORP's revenue and earnings growth?
NVIDIA CORP (NVDA) grew revenue by 65.5% year-over-year. Earnings per share increased by 66.1% compared to the prior year. Double-digit revenue growth indicates strong demand and market share gains.
Q: Is NVIDIA CORP buying back stock?
NVIDIA CORP (NVDA) repurchased $40.1 billion of stock over the trailing twelve months. This represents a buyback yield of 0.9%.
Q: How does NVIDIA CORP compare to competitors in Technology?
Compared to other companies in Technology, NVIDIA CORP (NVDA) shows: ROIC of 97.3% is above the sector median of 6.5% (Top 0%). FCF margin of 44.8% exceeds the sector median of 10.0% (Top 0% of sector). Gross margin at 71.1% is 18.1 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Technology companies with available SEC filings.
Q: What warning signs should I watch for with NVIDIA CORP?
Investors in NVIDIA CORP (NVDA) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-11-19. TTM metrics as of Q1 2026.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.