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Only two stocks in the benchmark semiconductor index beat Nvidia when ranked by these three measures

By Philip van Doorn

Nvidia just reported its best quarter in 10 years. A deeper look shows the company outperforming most of its industry.

After the stock market closed Feb. 16, Nvidia Corp. reported a blowout quarter, which included sales rising 53% to a record high from a year earlier. The company's outlook for the next quarter also came in higher than analysts had expected.

Read:Nvidia profit doubles, and executives see accelerated growth ahead despite supply-chain concerns

Nvidia's (NVDA) shares dropped 8% the following day.

Why might that have happened? Because some investors apparently believe the company cannot do any better.

Nvidia's massive margins

The reason some investors might believe Nvidia has achieved peak performance is that it had its best quarter in at least 10 years by three commonly used profitability measures.

Gross margin -- fourth quarter, fiscal 2022  Gross margin -- fourth quarter, fiscal 2021  Operating margin -- fourth quarter, fiscal 2022  Operating margin -- fourth quarter, fiscal 2021  Net margin -- fourth quarter, fiscal 2022  Net margin -- fourth quarter, fiscal 2021 
                                    66.53%                                      63.10%                                          44.94%                                          36.78%                                    39.29%                                    29.12% 
                                                                                                                                                                                                                                                           Source: FactSet 

Nvidia's fourth quarter of fiscal 2022 ended Jan. 30 -- many companies have fiscal years that don't match the calendar.

For the quarter ended Jan. 30, all three of these profit margins for Nvidia were at their highest levels in at least 40 quarters.

More about the margins:

Nvidia's margins versus its peers'

How do Nvidia's margins compare with those of other members of its sector index? The answer is very well, if we compare Nvidia to the other 29 stocks in the PHLX Semiconductor Index , which is tracked by the iShares Semiconductor ETF (SOXX). Yes, it may be "unfair" to compare the profit margins of companies with different business models, but there is no need for investors to make fair comparisons.

What follows are top-10 rankings for each of the margins among the SOXX 30, according to the most recent quarterly data provided by FactSet:

Gross margin

Company                         Ticker  Quarterly gross margin  Gross margin rank  Date of most recent financial report available in FactSet 
 Universal Display Corp.         OLED                   74.07%                  1                         09/30/2021 
Xilinx Inc.                      XLNX                   71.56%                  2                         01/01/2022 
Texas Instruments Inc.           TXN                    69.33%                  3                         12/31/2021 
Nvidia Corp.                     NVDA                   66.53%                  4                         01/30/2022 
Lattice Semiconductor Corp.      LSCC                   64.23%                  5                         01/01/2022 
KLA Corp.                        KLAC                   60.86%                  6                         12/31/2021 
Qualcomm Inc                     QCOM                   59.80%                  7                         12/26/2021 
Teradyne Inc.                    TER                    59.34%                  8                         12/31/2021 
Monolithic Power Systems Inc.    MPWR                   57.62%                  9                         12/31/2021 
Broadcom Inc.                                           55.99%                 10                         10/31/2021 
                                                                                                                             Source: FactSet 

You can click on the tickers for more about each company.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.

Operating margin

Company                                            Ticker  Quarterly operating  margin  Operating margin rank  Date of most recent financial report available in FactSet 
 Taiwan Semiconductor Manufacturing Co. Ltd. ADR    TSM                         66.99%            1                                   12/31/2021 
Texas Instruments Inc.                              TXN                         57.33%            2                                   12/31/2021 
Broadcom Inc.                                       AVGO                        55.73%            3                                   10/31/2021 
Micron Technology Inc.                               MU                         55.48%            4                                   12/02/2021 
Universal Display Corp.                             OLED                        47.72%            5                                   09/30/2021 
United Microelectronics Corp. ADR                   UMC                         47.43%            6                                   12/31/2021 
Microchip Technology Inc.                           MCHP                        46.39%            7                                   12/31/2021 
Nvidia Corp.                                        NVDA                        44.94%            8                                   01/30/2022 
KLA Corp.                                           KLAC                        44.70%            9                                   12/31/2021 
Skyworks Solutions Inc.                             SWKS                        41.70%           10                                   12/31/2021 
                                                                                                                                                         Source: FactSet 

Net margin

Company                                           Ticker  Quarterly net margin  Net margin rank  Date of most recent financial report available in FactSet 
Texas Instruments Inc.                             TXN                  44.06%         1                                12/31/2021 
Nvidia Corp.                                       NVDA                 39.29%         2                                01/30/2022 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR    TSM                  37.94%         3                                12/31/2021 
ASML Holding N.V. ADR                              ASML                 35.57%         4                                12/31/2021 
Universal Display Corp.                            OLED                 31.93%         5                                09/30/2021 
Qualcomm Inc                                       QCOM                 31.75%         6                                12/26/2021 
KLA Corp.                                          KLAC                 30.52%         7                                12/31/2021 
Micron Technology Inc.                              MU                  30.00%         8                                12/02/2021 
Xilinx Inc.                                        XLNX                 29.68%         9                                01/01/2022 
Applied Materials Inc.                             AMAT                 28.58%        10                                01/30/2022 
                                                                                                                                           Source: FactSet 

Nvidia ranks within the top 10 for each of the quarterly profit margins.

Combined margin score

A next step, while hardly scientific (especially in light of the accounting vagaries that can affect net earnings), might be to score the companies by adding their rankings for each of the the margins together, and then sort by combined score -- in ascending order. Here are the results for the most recent available quarters:

Company                                           Ticker  Combined margin score -- lower is better  Gross margin  Operating  margin  Net margin 
Texas Instruments Inc.                             TXN                       6                           69.33%             57.33%      44.06% 
Universal Display Corp.                            OLED                     11                           74.07%             47.72%      31.93% 
Nvidia Corp.                                       NVDA                     14                           66.53%             44.94%      39.29% 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR    TSM                      18                           52.66%             66.99%      37.94% 
KLA Corp.                                          KLAC                     22                           60.86%             44.70%      30.52% 
Qualcomm Inc                                       QCOM                     24                           59.80%             39.89%      31.75% 
Broadcom Inc.                                      AVGO                     26                           55.99%             55.73%      26.85% 
Xilinx Inc.                                        XLNX                     27                           71.56%             35.44%      29.68% 
ASML Holding N.V. ADR                              ASML                     28                           54.17%             38.95%      35.57% 
Micron Technology Inc.                              MU                      33                           46.38%             55.48%      30.00% 
                                                                                                                               Source: FactSet 

Nvidia is in the top 10 among the SOXX 30 for all three margins, while ranking third for the combined score, behind Texas Instruments Inc. (TXN) and Universal Display Corp. (OLED).

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02-19-22 0815ET

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