NVIDIA CORP. $12 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 624.9 million; Market cap: $7.5 billion; Price-to-sales ratio: 1.7; Dividend yield: 2.5%; TSINetwork Rating: Average; www.nvidia .com) is down 20% in the past year. That’s mainly because slowing sales of traditional computers are hurting demand for its graphic chips, which make computer video run more smoothly and appear more lifelike.
Nvidia continues to invest a high 24% of its revenue in research. That’s helping it expand into new areas, particularly chips for mobile devices. Its new Tegra chips now power Google and Microsoft’s new tablet computers.
As the world’s leading make of video chips, Nvidia will also benefit from several long-term trends. These include new video games with faster, more realistic characters and action. Device makers are also upgrading their smartphones and tablets with higher quality displays.
Nvidia’s strong balance sheet will continue to support its high research spending. It has little debt, and holds cash of $3.4 billion, or $5.54 a share. That’s nearly half its market cap.
The stock will likely remain volatile. Even so, it still trades at a reasonable 14.0 times the $0.86 a share it should earn in its current fiscal year. The company has also started paying a quarterly dividend of $0.075 a share. The annual rate of $0.30 yields 2.5%.
Nvidia is a buy.
