⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $NVDA 🧘🏽‍♂️

•NTM P/E Ratio: 35.34x
•10-Year Mean: 34.68x

•NTM FCF Yield: 2.46%
•10-Year Mean: 3.36%

As you can see, $NVDA appears to be trading somewhere between fairly valued & overvalued

Going forward, investors can receive ~2% LESS in earnings per share & ~26% LESS in FCF per share 🧠***

Before we get into valuation, let’s take a look at why $NVDA is a quality business

BALANCE SHEET✅
•Cash & Short-Term Inv: $31.44B
•Long-Term Debt: $8.46B

$NVDA has a strong balance sheet, an AA- S&P Credit Rating, & 159x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2020: 19.1%
•2021: 19.1%
•2022: 26.0%
•2023: 16.2%
•2024: 60.5%
•LTM: 78.3%

RETURN ON EQUITY✅
•2020: 26.0%
•2021: 29.8%
•2022: 44.8%
•2023: 17.9%
•2024: 91.5%
•LTM: 115.7%

$NVDA has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2019: $11.72B
•2024: $60.92B
•CAGR: 39.04%

FREE CASH FLOW✅
•2019: $3.14B
•2024: $27.02B
•CAGR: 53.79%

NORMALIZED EPS✅
•2019: $0.17
•2024: $1.30
•CAGR: 50.21%

SHARE BUYBACKS❌ (nominal change)
•2019 Shares Outstanding: 25.00B
•LTM Shares Outstanding: 24.94B

MARGINS✅
•LTM Gross Margins: 75.3%
•LTM Operating Margins: 59.8%
•LTM Net Income Margins: 53.4%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~2% LESS in EPS & ~26% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $NVDA has to grow earnings at a 17.67% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (17.67%) required growth rate:

2025E: $2.74 (111.4% YoY) *FY Jan
2026E: $3.73 (36.0% YoY)
2027E: $4.34 (16.4% YoY)

$NVDA has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $NVDA ends 2027 with $4.34 in EPS & see its CAGR potential assuming different multiples

33x P/E: $143.22💵 … ~13.6% CAGR

32x P/E: $138.88💵 … ~12.3% CAGR

31x P/E: $134.54💵 … ~10.9% CAGR

30x P/E: $130.20💵 … ~9.4% CAGR

29x P/E: $125.86💵 … ~8.0% CAGR

As you can see, $NVDA appears to have attractive return potential IF we assume >31x earnings, a multiple below its 10-year mean & a multiple that‘a justified given the company’s growth rate & moat

Although my research leads me to believe that $NVDA is a fair consideration today at $104💵, I am personally less inclined to buy at these levels & would strongly consider $NVDA closer to $95💵 where I could reasonably expect ~12% CAGR assuming a 29x end multiple

#stocks #investing
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
tweet

⁠Librarian Capital
New Boeing $BA CEO Kelly Ortberg, unlike outgoing CEO David Calhoun and COO Stephanie Pope *, does not have a degree in accounting

Instead, Ortberg studied mechanical engineering (Iowa)

(from Virginia Tech and Southwest Missouri State University respectively) https://t.co/4G6AKJnzzP
tweet

⁠Librarian Capital
Mastercard $MA 24Q2 (adjusted basis)

Revenue +13% ex-FX, +11% in $
OpEx +9%, EBIT +12%
Net Income +22% (lower tax rate), EPS +24%

Shares +2.8% pre-market https://t.co/aImjfur1dI
tweet

⁠Librarian Capital
Interesting thought experiment on Altria $MO

If you just look at the "Marlboro Price Gap" chart below, with the gap widening since 17Q2 trough, to what level you think Marlboro's market share has fallen by 24Q1?

(Hint: 17Q2 share was 43.5%)

Probably not sustainable for $MO . . .

If you are long the stock here, how do you not worry about this? https://t.co/qGKqfsFFO1 - Chris Pavese
tweet

⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: 15 Quality Stocks Double-Digit EPS Growth 2025-2026 | LTM ROIC | FFO Int Coverage 💵

🖨️ ASML Holding $ASML
•2025E: $29.85 (58.7% YoY)
•2026E: $34.61 (16.0% YoY)
•LTM ROIC: 39.7%
•FFO Int Coverage: 33.92x

💳 Mastercard $MA
•2025E: $16.57 (16.1% YoY)
•2026E: $19.33 (16.7% YoY)
•LTM ROIC: 64.1%
•FFO Int Coverage: 19.79x

📈 S&P Global $SPGI
•2025E: $16.15 (12.7% YoY)
•2026E: $18.16 (12.5% YoY)
•LTM ROIC: 9.0%
•FFO Int Coverage: 12.58x

💸 Visa $V
•2025E: $11.08 (11.7% YoY)
•2026E: $12.56 (13.4% YoY)
•LTM ROIC: 35.7%
•FFO Int Coverage: 31.19x

📊 Salesforce $CRM
•2025E: $11.01 (11.2% YoY)
•2026E: $12.60 (14.4% YoY)
•LTM ROIC: 9.0%
•FFO Int Coverage: 413.45x

🖱️ Alphabet $GOOG $GOOGL
•2025E: $8.73 (14.0% YoY)
•2026E: $9.95 (14.0% YoY)
•LTM ROIC: 31.7%
•FFO Int Coverage: 341.10x

📸 Meta Platforms $META
•2025E: $23.19 (14.4% YoY)
•2026E: $26.28 (13.3% YoY)
•LTM ROIC: 30.1%
•FFO Int Coverage: 147.42x

🧬 Thermo Fisher Scientific $TMO
•2025E: $24.09 (10.8% YoY)
•2026E: $26.97 (11.9% YoY)
•LTM ROIC: 9.0%
•FFO Int Coverage: 6.38x

🏦 Intercontinental Exchange $ICE
•2025E: $6.68 (11.2% YoY)
•2026E: $7.41 (11.0% YoY)
•LTM ROIC: 7.7%
•FFO Int Coverage: 4.47x

📑 Intuit $INTU
•2025E: $19.20 (13.8% YoY)
•2026E: $22.09 (15.1% YoY)
•LTM ROIC: 15.0%
•FFO Int Coverage: 21.24x

🚛 Old Dominion Freight $ODFL
•2025E: $6.66 (16.8% YoY)
•2026E: $7.56 (13.6% YoY)
•LTM ROIC: 40.1%
•FFO Int Coverage: 3,381x

🚘 Copart $CPRT
•2025E: $1.63 (13.2% YoY)
•2026E: $1.80 (10.5% YoY)
•LTM ROIC: 21.7%
•FFO Int Coverage: n/a (nominal debt)

🌐 MSCI Inc $MSCI
•2025E: $16.76 (13.1% YoY)
•2026E: $19.06 (13.7% YoY)
•LTM ROIC: 36.3%
•FFO Int Coverage: 7.10x

🧾 PayPal $PYPL
•2025E: $4.58 (10.2% YoY)
•2026E: $5.08 (11.0% YoY)
•LTM ROIC: 15.7%
•FFO Int Coverage: 16.16x

🥤 Monster Beverage $MNST
•2025E: $2.03 (14.7% YoY)
•2026E: $2.29 (12.9% YoY)
•LTM ROIC: 24.0%
•FFO Int Coverage: 5,136x

___

The FFO (Funds From Operations) interest coverage ratio is a financial metric that measures a company's ability to pay its interest expenses from its cash flow. It's calculated by dividing the company's FFO by its interest expenses. FFO is a measure of a company's cash flow from its core business operations, excluding non-cash items like depreciation and amortization.

A higher FFO interest coverage ratio is considered good because it indicates that a company has sufficient cash flow to cover its interest expenses, making it less likely to default on its debt obligations. A higher ratio also suggests that a company has more flexibility to take on additional debt, invest in growth opportunities, or return capital to shareholders. Generally, a ratio of 4.00x or higher is considered healthy, but the ideal ratio can vary depending on the industry and company-specific factors.
________

#stocks #investing
tweet

⁠Brandon Beylo
RT @marketplunger1: Capital Returns is a must-read for any investor that wants to up their game.

The book teaches you how changes in an industry's supply side can affect competitive positioning, economics, and more.

You can read it in a weekend!

Here are my 5 Favorite Lessons from the book ... 🧵 https://t.co/iVu5n88I9z
tweet

⁠Bamboo
What stocks have you purchased this week? Share with us.
tweet

⁠Bamboo
Bamboo is on the lookout for a Customer Experience Analyst to shape user interactions, drive product improvements, and elevate customer satisfaction.

Think you’re perfect for the role?
Apply now via this link:

https://t.co/QTdfAhXEhG https://t.co/iw0qo8w92I
tweet

⁠Hidden Value Gems
An interesting case on $NDAQ by Oakmark:

✅ “Over the past decade, under the leadership of CEO Adena Friedman, Nasdaq has transformed from a traditional equity exchange into a collection of fast-growing, high-quality software and data businesses with the majority of revenue coming from non-exchange segments.”

✅ “Nasdaq’s recent acquisition of Adenza led some investors to question management’s capital allocation discipline. However, we believe the subsequent share price reaction more than compensates for the risk that Nasdaq overpaid for Adenza.”

✅ “More importantly, the experience seems to have catalyzed a renewed focus on organic growth, debt paydown, and capital return. Despite Nasdaq’s potential for faster than average growth, high mix of recurring revenue, and impressive operating margins, the stock trades at a P/E multiple in line with the broader market.”
tweet