< Return to Bulls pageNVIDIA is a good company in a growing industry.
NVIDIA is clearly in no financial trouble. Management, too, is outstanding. Jen-Hsun Huang is the company's founder and CEO, holds a respectable 6% of shares, and has led NVIDIA through multiple graphics chip generations and a crippling technology boom and bust cycle. NVIDIA has emerged triumphant where a long list of competitors (3dfx, Matrox, S3, Creative) are either long gone or long ago exited this tough business. NVIDIA is a good company in a growing industry.
In assessing the cash flow statement of Nvidia (NVDA), here are my top three items:
- Operating Cash flow has been growing faster than net income being driven by the continuous focus on improving Accounts Receivable DSO (Daily Sales Outstanding)
- This increase in Operating Cash Flow has helped keep any debt off the balance sheet in connection with paying for any acquisitions that have been completed.
- Healthy Free Cash Flow with a yield of ~7.4% for 2008, coming in at +350 basis points higher than the 10-year Treasury note.
Over the last 5 years, there was a small amount of debt back in 2004 which has been eliminated since then. This results in the debt to equity % metric to be 0%, anything under 100% is favorable from a value standpoint. As a note of caution while I foot through the 10k, there appears to be some operating leases that the firm highlights as contractual obligations. Out of the total $941 million contractual obligations in the 2008 annual report, $188.6 million represent operating leases, a form of debt.
