What is NVDA's Intrinsic value?

NVIDIA Corp (NVDA) Intrinsic Value Analysis

Executive Summary

As of June 26, 2025, NVIDIA Corp's estimated intrinsic value ranges from $15.77 to $253.75 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $253.75 +64.4%
Discounted Cash Flow (5Y) $149.84 -2.9%
Dividend Discount Model (Multi-Stage) $131.09 -15.0%
Dividend Discount Model (Stable) $54.06 -65.0%
Earnings Power Value $15.77 -89.8%

Is NVIDIA Corp (NVDA) undervalued or overvalued?

With the current market price at $154.31, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate NVIDIA Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.01 1.1
Cost of equity 8.5% 11.0%
Cost of debt 4.0% 4.5%
Tax rate 3.4% 7.5%
Debt/Equity ratio 0 0
After-tax WACC 8.5% 11.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 9.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $130,497 (FY01-2025) to $982,435 (FY01-2035)
  • Net profit margin expansion from 56% to 68%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $150 $3,647,548M 79.8%
10-Year Growth $254 $6,181,607M 67.5%
5-Year EBITDA $173 $4,219,368M 82.5%
10-Year EBITDA $278 $6,780,298M 70.3%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 1.3%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.8%
  • Long-term growth rate: 4.0%
  • Fair value: $131.09 (-15.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.0% (Low) to 8.5% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $28 to $81
  • Selected fair value: $54.06 (-65.0% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $36,222M
Discount Rate (WACC) 11.0% - 8.5%
Enterprise Value $329,786M - $425,905M
Net Debt $(6,770)M
Equity Value $336,556M - $432,675M
Outstanding Shares 24,388M
Fair Value $14 - $18
Selected Fair Value $15.77

Key Financial Metrics

Metric Value
Market Capitalization $3763250M
Enterprise Value $3756480M
Trailing P/E 49.02
Forward P/E 33.07
Trailing EV/EBITDA 18.05
Current Dividend Yield 2.79%
Dividend Growth Rate (5Y) 20.54%
Debt-to-Equity Ratio 0.00

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $76.13
Discounted Cash Flow (5Y) 25% $37.46
Dividend Discount Model (Multi-Stage) 20% $26.22
Dividend Discount Model (Stable) 15% $8.11
Earnings Power Value 10% $1.58
Weighted Average 100% $149.49

Investment Conclusion

Based on our comprehensive valuation analysis, NVIDIA Corp's weighted average intrinsic value is $149.49, which is approximately 3.1% below the current market price of $154.31.

Key investment considerations:

  • Strong projected earnings growth (56% to 68% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.00)
  • Historical dividend growth of 20.54%

Given these factors, we believe NVIDIA Corp is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.