NVIDIA Bonds
NVDA Stock | USD 795.18 33.18 4.35% |
NVIDIA holds a debt-to-equity ratio of 0.557. At present, NVIDIA's Short and Long Term Debt Total is projected to increase significantly based on the last few years of reporting. The current year's Net Debt is expected to grow to about 4 B, whereas Short and Long Term Debt is forecasted to decline to about 817.4 M. NVIDIA's financial risk is the risk to NVIDIA stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
NVIDIA's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. NVIDIA's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps NVIDIA Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect NVIDIA's stakeholders.
For most companies, including NVIDIA, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running NVIDIA the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book 46.2551 | Book Value 17.442 | Operating Margin 0.6159 | Profit Margin 0.4885 | Return On Assets 0.3855 |
NVIDIA |
NVIDIA Bond Ratings
NVIDIA bond ratings play a critical role in determining how much NVIDIA have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for NVIDIA's borrowing costs.Piotroski F Score | 4 Poor |
Beneish M Score | -2.18 Possible Manipulator |
NVIDIA Debt to Cash Allocation
As NVIDIA follows its natural business cycle, the capital allocation decisions will not magically go away. NVIDIA's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company currently holds 11.06 B in liabilities with Debt to Equity (D/E) ratio of 0.56, which is about average as compared to similar companies. NVIDIA has a current ratio of 3.32, suggesting that it is liquid enough and is able to pay its financial obligations when due. Debt can assist NVIDIA until it has trouble settling it off, either with new capital or with free cash flow. So, NVIDIA's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like NVIDIA sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for NVIDIA to invest in growth at high rates of return. When we think about NVIDIA's use of debt, we should always consider it together with cash and equity.NVIDIA Total Assets Over Time
NVIDIA Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the NVIDIA's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of NVIDIA, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a NVIDIA debt ratio should be compared their industry average or other competing firms.NVIDIA Corporate Bonds Issued
NVIDIA issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. NVIDIA uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most NVIDIA bonds can be classified according to their maturity, which is the date when NVIDIA has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
NVIDIA Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning NVIDIA Use of Financial Leverage
NVIDIA financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures NVIDIA's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of NVIDIA assets, the company is considered highly leveraged. Understanding the composition and structure of overall NVIDIA debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to NVIDIA's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of NVIDIA's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Last Reported | Projected for Next Year | ||
Short and Long Term Debt Total | 11.1 B | 11.6 B | |
Net Debt | 3.8 B | 4 B | |
Short Term Debt | 1.5 B | 1.6 B | |
Long Term Debt | 8.5 B | 8.9 B | |
Long Term Debt Total | 11.2 B | 11.7 B | |
Short and Long Term Debt | 1.1 B | 817.4 M | |
Net Debt To EBITDA | 0.11 | 1.19 | |
Debt To Equity | 0.23 | 0.45 | |
Interest Debt Per Share | 4.13 | 3.15 | |
Debt To Assets | 0.15 | 0.26 | |
Long Term Debt To Capitalization | 0.16 | 0.28 | |
Total Debt To Capitalization | 0.19 | 0.31 | |
Debt Equity Ratio | 0.23 | 0.45 | |
Debt Ratio | 0.15 | 0.26 | |
Cash Flow To Debt Ratio | 2.83 | 0.77 |
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Try AI Portfolio ArchitectCheck out the analysis of NVIDIA Fundamentals Over Time. For information on how to trade NVIDIA Stock refer to our How to Trade NVIDIA Stock guide.Note that the NVIDIA information on this page should be used as a complementary analysis to other NVIDIA's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Complementary Tools for NVIDIA Stock analysis
When running NVIDIA's price analysis, check to measure NVIDIA's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy NVIDIA is operating at the current time. Most of NVIDIA's value examination focuses on studying past and present price action to predict the probability of NVIDIA's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move NVIDIA's price. Additionally, you may evaluate how the addition of NVIDIA to your portfolios can decrease your overall portfolio volatility.
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Is NVIDIA's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of NVIDIA. If investors know NVIDIA will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about NVIDIA listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 7.613 | Dividend Share 0.16 | Earnings Share 11.93 | Revenue Per Share 24.675 | Quarterly Revenue Growth 2.653 |
The market value of NVIDIA is measured differently than its book value, which is the value of NVIDIA that is recorded on the company's balance sheet. Investors also form their own opinion of NVIDIA's value that differs from its market value or its book value, called intrinsic value, which is NVIDIA's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because NVIDIA's market value can be influenced by many factors that don't directly affect NVIDIA's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between NVIDIA's value and its price as these two are different measures arrived at by different means. Investors typically determine if NVIDIA is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, NVIDIA's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.