One Visual Computing Company Worth a Second Look Through the Lens of G.A.R.P

Nvidia is a visual computing company with a vast array of products, services, and distributors, some of which you may be familiar with. Google, HTC, Lenovo, Motorola, Microsoft, Audi, and Asus are a few.

Over 70% of android tablets use Nvidia, while over 90% of cars rely on Quadro GPU’s and over 10% of the worlds best super computers run on TESLA, GPUS. The product line can be confusing and does need further research to become aware with the needs that are being fulfilled. Cloud enterprise business is growing and expanding into a 3D grid system. Recently Nvidia announced it would be making an entrance into the mobile gaming industry with “Project Shield” an attempt to harmonize tablet/ smartphone gaming with the visual capabilities of traditional game consoles (Xbox, PS3).

Currently the share price is trading at a suppressed value of $12.23 and hasn’t had much traction recently. Book value is currently $7.56 with a E.P.S of 0.94 cents. Included in the book value is $4.89 cash per share.
Recently a buy back plan was announced for up to 1.24 Billion or 16.6% of total shares at current prices. A dividend was also initiated at the end of 2012 of 0.30 cents annual, representing a yield of 2.45%.

The company has deep pockets and minimal debt currently while expanding free cash flow, revenue and E.P.S quickly.

3.9 Billion in Current Assets vs. 930 Million Current Liabilities (4.46 Current Ratio)

Price to Free Cash flow: 9.7 or $1.20 per share.
5 Year average Free Cash Flow growth of 10%
2012 Y.O.Y: 33.31%
2011 Y.O.Y: 40.88%

5 Year Revenue growth of 5.43% & 2012 Y.O.Y growth of 12.83%

10 Year E.P.S growth of 10.59%

P/E = 15.1

Clearly there will be room to continue to grow distributions & retained earnings. While operating margins stabilize/expand near 15%, Inventory Turnover & cash conversion have also become more efficient now at 5.33 & 40.71 respectively. With 2013 E.P.S of 1.03 at 15 P/E + Cash Per share would give you just under $20 per share, over 66% higher from where it is currently.

Finally the Fidelity Growth Fund owns 7.72% of total shares (FDGRX) which shows institutional strength.

I have no positions mentioned above but my initiate a position in the next 72-hours.

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2 thoughts on “One Visual Computing Company Worth a Second Look Through the Lens of G.A.R.P

  1. I’ve owned NVDA off and on for the past few years. It’s a great company and believe it’s a good buy in the sub $12 range. I think they’re positioned well to grow, particularly in the smart phone market.

    • Thanks for your comments. Agreed, I believe Tegra 4 will be an enormous generator of cash flow in the coming years and have recently bought a small position (11.96) – recent weakness is due to market dislike of “Project Shield” & the entrance into electronic gaming.

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