Dear Followers&Copiers, Another Financial Year (FY) has passed, the reporting season is over and it’s time to update the equity portfolio of the Global Leaders Portfolio (GLP) in terms of the SIAScore we use.
Let’s quickly remind what SIAScore is and how the process :
S1: growing sector 1pts/0pts,
S2: incumbent or prospective global leader 1pts/0pts,
S3: growing or stable wide margins (40%+ gross; 3yr avg) 2pts/0pts,
S4: Net Debt/EBITDA <1.5 (last 3 ended FYs) 2pts/0pts,
S5: above-average cash flows (FCF/MktCap (last 3 ended FYs) > S&P500 Dividend Yield or US 10yr Treasry Yield (higher of the values)) 2pts/0pts;
MAX TOTAL SCORE: 8pts/MIN TOTAL SCORE: 0pts/MIN SCORE TO QUALIFY: 4pts
In this post I run a SIAScore update for $NVDA, which “focuses on personal computer (PC) graphics, graphics processing unit (GPU) and also on artificial intelligence (AI). It operates through two segments: GPU and Tegra Processor. Its GPU product brands are aimed at specialized markets, including GeForce for gamers; Quadro for designers; Tesla and DGX for AI data scientists and big data researchers; and GRID for cloud-based visual computing users. Its Tegra brand integrates an entire computer onto a single chip, and incorporates GPUs and multi-core central processing units (CPUs) to drive supercomputing for mobile gaming and entertainment devices, as well as autonomous robots, drones and cars. The Company’s processor has created platforms that address four markets: Gaming, Professional Visualization, Datacenter, and Automotive. Its offerings include NVIDIA DGX AI supercomputer, the NVIDIA DRIVE AI car computing platform and the GeForce NOW cloud gaming service.” (CNBC)
S1-S1: these qualitative points are clear. $NVDA both operates in a growing sector (S1) and is an incumbent global leader (S2). In both cases the company gets 1 point.
S3: 2 points
2018——2019——-2020——-AVG——-last yr AVG
61,5%…62,10%….65,10%…….62,90%…….61,17%
$NVDA has been showing nice and steady growth in Gross Profit Margin, resulting in a YoY growht of the 3yr average as well. This undelines the thesis that the company offers high-value-added new technology products, which let it conduct agressive pricing policies. Well done.
S4: 2 points
2018——2019——-2020——-AVG——-last yr AVG
-1,32…….-2,44……-0,58…….-1,45……….-1,75
$NVDA ‘s 3yr average NetDebt/EBITDA is way in the negative territory, which is a positive (cash positive position). Although a worsening in 2020 must be noted. Still there’s yet a far way out until our SIAScore +1,5 limit for the 3yr average.
S5: 2 points
2018——2019——-2020——-AVG——-last yr AVG
3,24%…….2,79%……1,50%……2,51%……..2,67%
The FCF yield is easily above the minimum treshold level, which is currently at higher of the two: the $SPX500 dividend yield (1,53%) and the 10Y treasury note yield (1,7%). $NVDA keeps producing long-term shareholder value.
Aggregate SIAScore for $NOW (ServiceNow Inc): 8 points (stable YoY).
Conclusion: The company has a stable financial standing and easily qualifies to be a memebr of the GLP portfolio. IT also provides good long-term perspecitves for its stockholders and creates value. Over the last trailing year $NVDA is up 150% (from a Covid-19 downturn low, which was around this time of the year). Meanwhile the company rode on the stay-at-home trend and managed to improve its revenues by almost 50%, GPM went up and Net Profit by 80% yoy in FY21. $NVDA is a stock to hold still.
Best regards, GlobalAlphaS
Disclaimers: None of the ideas, views and thoughts presented here shall ever be taken as a recommendation to buy or sell stocks,bonds,FX,commodities or any other financial instruments as stated in REGULATION (EU) No 596/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC or the Polish Act of 10 February 2017 amending the act on trading in financial instruments and some other acts. The article is for educational reasons and purely presents private views of the author, thus the author shall not be held accountable for any losses of a third party resulting from any potential trading activities in any instruments, both specifically or by category of assets. The author uses his best knowledge and data from sources believed to be reliable, but makes no representations as to the accuracy of the data.Full Disclaimers&Liability Limitations page.
