Module One: Nvidia Valuation

A] INTRODUCTION:

NVIDIA Corporation is a globally recognized leader in technology, particularly known for its expertise in
graphics processing units (GPUs) and artificial intelligence (AI). Established in 1993 by Jensen Huang,
Chris Malachowsky, and Curtis Priem, the company first made a name for itself with high-performance
GPUs for gaming and professional visualization. As the years passed, NVIDIA expanded its scope to
embrace AI, data centers, automotive technology, and edge computing. Its pioneering achievements in
AI, especially through the CUDA parallel computing platform and GPU-accelerated computing, have
solidified NVIDIA's status as an industry frontrunner, fostering significant advancements in autonomous
vehicles, robotics, and deep learning.

B] Forecasting Analysis summary:

 Revenue Growth Rate: Growth starts at 22% in January 2025 and accelerates significantly,
reaching 80% by January 2029. This indicates strong confidence in the company’s future
expansion and market performance.

 COGS/Sales (Cost of Goods Sold/Sales): COGS starts at 41% in January 2025 and increases to
52% by January 2029. This suggests rising production costs, which could impact profit margins if
not managed effectively.
 SG&A/Sales (Selling, General & Administrative Expenses/Sales): SG&A expenses are high at
15% in January 2025, fluctuate, and peak at 29% by January 2029. This indicates potential
challenges in managing operational and administrative costs.
 R&D/Sales (Research & Development/Sales): Investment in R&D starts at 20% in January 2025
and increases to 30% by January 2029, showing a strong and growing commitment to innovation
and product development.
 Interest Rate Earned on Surplus Cash: The interest rate remains relatively stable, ranging from
4% to 5%, indicating stable returns on cash reserves.
 Interest Rate Paid on Additional Financing: This row is not provided, suggesting no significant
changes or the need for additional financing.
  Tax Rate: The tax rate remains constant at 21% throughout the period, indicating stable tax
obligations.
 AR/Sales (Accounts Receivable/Sales): Accounts receivable as a percentage of sales start at 21%
in January 2025, rising to 26% by January 2029. This indicates increasing sales on credit, which
could impact cash flow.

 Inventory/Sales: Inventory as a percentage of sales fluctuates, peaking at 20% in January 2028,

suggesting variability in inventory management efficiency.
 Prepaid Expenses/Sales: Prepaid expenses range from 3% to 5%, indicating consistent
prepayment practices.
 Net PPE/Sales (Net Property, Plant, and Equipment/Sales): Net PPE as a percentage of sales
decreases from 15% in January 2025 to 9% in January 2029, reflecting potential improvements in
asset utilization or shifts towards less capital-intensive operations.
 Payables/Sales: Accounts payable as a percentage of sales remain relatively stable, ranging from
6% to 9%, suggesting consistent management of supplier credit.
 Accruals/Sales: Accrued expenses remain stable, indicating consistent accrual practices.
 Unearned Revenue/Sales: Unearned revenue as a percentage of sales decreases from 2% to 1%,
indicating a reduction in advance payments from customers.
 Other Current Liabilities/Sales: Other current liabilities fluctuate, peaking at 8% in January 2027
and then decreasing, suggesting variability in other short-term obligations.

C] Ratio Analysis

Current Ratio:

 Measures the company's ability to pay short-term obligations.

 Declines from 2.52 in January 2025 to 1.54 in January 2029.
 A decreasing trend indicates a potential decline in liquidity, suggesting the company might face
difficulties in meeting short-term liabilities if this trend continues

Receivables Turnover:

 Measures how efficiently the company collects its receivables.

  Declines from 4.55 in January 2025 to 3.03 in January 2028, then increases to 4.76 in January
2029.
 Indicates initial deterioration in receivables collection efficiency, followed by improvement.

Average Receivables Collection Period:

 Indicates the average number of days it takes to collect receivables.

 Increases from 80.30 days in January 2025 to 120.45 days in January 2028, then decreases to
76.65 days in January 2029.
 Longer collection periods suggest potential cash flow issues, with improvement expected
towards the end of the period.

Fixed Asset Turnover:

 Measures the efficiency of using fixed assets to generate sales.

 Fluctuates significantly, peaking at 11.11 in January 2026, indicating highly efficient use of fixed
assets during that period, but generally showing variability.

Total Asset Turnover:

 Measures how efficiently the company uses its assets to generate sales.
 Improves from 0.74 in January 2025 to 1.01 in January 2029, indicating increasing efficiency in
asset utilization over time.

Debt Ratio:

 Indicates the proportion of assets financed by debt.

 Fluctuates between 0.28 and 0.44, increasing towards January 2029.
 A higher debt ratio towards the end suggests increased leverage, which could indicate higher
financial risk.

Gross Margin:

 Measures the percentage of revenue that exceeds the cost of goods sold.
 Declines from 69.00% in January 2025 to 50.00% in January 2029, suggesting decreasing
profitability at the gross level.

Operating Margin:

 Measures the percentage of revenue remaining after deducting operating expenses.

 Declines from 37.00% in January 2025 to 10.00% in January 2029, indicating decreasing
efficiency in controlling operating costs.

Profit Margin on Sales:

 Measures the percentage of revenue that turns into profit.

  Declines from 29.89% in January 2025 to 8.79% in January 2029, showing decreasing net
profitability.

Return on Assets (ROA):

 Measures how efficiently a company uses its assets to generate profit.

 Declines from 22.03% in January 2025 to 8.84% in January 2029, indicating reduced efficiency in
asset utilization for generating profit.

Return on Equity (ROE):

 Measures the return generated on shareholders' equity.

 Declines from 33.70% in January 2025 to 15.86% in January 2029, indicating a reduction in
profitability for shareholder

Profit Margin on Sales:

 As noted, declines from 29.89% in January 2025 to 8.79% in January 2029, impacting overall
profitability.

Total Asset Turnover:

 As noted, improves from 0.74 to 1.01, indicating better asset utilization.