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:
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.
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
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 0815ETCopyright (c) 2022 Dow Jones & Company, Inc.