NVDA earnings release

The company reported $0.79 EPS on $1.94 billion in revenue, beating consensus of $0.66 EPS on $1.91 billion in revenue. More importantly, NVIDIA’s revenue was up 48 percent from a year ago while GAAP EPS was up 126 percent.

The company also gave very strong guidance for the second quarter, calling for $1.89 billion to $1.95 billion in revenue.

We got interested in this name back on March 29th because a few key metrics were very strong.   As mentioned on Stocktwits a few weeks ago, the only concern we had with $NVDA was its current valuation.   Not that it was bad, but against its peers it was one of the weakest.  The thing everyone needs to understand about valuation is, it’s a trailing metric and while something might look expensive today, a good report and a few upgrades, even with higher prices, it could get cheap again.   So while valuation was a slight concern, it’s just one of the levels we analyze and we know that the strength of a company in combination of all 7 levels.

The following couple of snapshots show why we had valuation concerns,  The fair value calculation (figure 1) showed a negative number, meaning the stock was already priced above its long term valuation.  While that might be a concern on the surface, the F/PE of 32 shows that this could be corrected with a decent EPS.   The average broker price target was around $113 which doesn’t leave much upside if you actual believe those guys.   The fair value ranges are also much lower than current price.  These are some of the key reasons the valuation score was low (NVDA was ranked 21st in valuation) against its peers in the SMH ETF (figure 2)

Figure 1


Figure 2



Now I will focus on the reason why we liked this to the long side.   The next image is what we call the Sum7.  It’s the summary page of all 7 levels where we do the final sort of sector or industry to see who ranks where.  This takes almost every metric into consideration.  So while NVDA had some valuation concerns, it took the #4 spot overall against its peers which means even at current price levels, it’s a very strong stock (industry leader)


With only names like AMAT, SWKS and LRCX coming out with a better rank.  All of those names are also up very big since this filtration.   If you just bought the top 4 as an equal weight holding, you would be up over 6% in just about 40 days with very little risk as we try to take the risk out by doing all these complication calculations.

To continue with the reasons we liked this name, growth was also something that kept us very interested.  While I don’t expect you to understand how we come up with the classic growth score vs the new growth score, just understand that NVDA ranked 3rd for all semi names,  Some key metrics we analyze on growth are shown below


Another factor that kept up long was the semi ETF SMH held its breakout level of $80-81. We took a chance holding a slightly losing position mostly because of the overall strength but also because we had time on our side.  NVDA formed a double bottom off 95 (great area to add to a position, defined risk) and had a decent size bounce that never broke support.  Price was trying to show everyone that others also thought this name wasn’t dead just yet.

The next image is a before and after of NVDA from when we starting our position vs how it looked today going into earnings,  Now that the report is out-of-the-way, price is through the first downtrend line and can very well retest those highs around 120.   A very interesting visual here is that triple tops rarely ever hold so if this name can make a new high, one should expect it to continue on up towards 130-135.


Lastly here is the stock report on NVDA.   Its a two page summary of all the mertrics for a specifc name that we like to have in one place.   Organization can always help increase returns.



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s