NVDA: Best Buy for 2022: NVIDIA vs. Himax Technologies

The growing adoption of consumer electronics, automobiles, industrial tools, and networking products has created strong demand for semiconductors since the pandemic, creating a global shortage of chips. However, increased government and business investments allowed companies to increase their production capacity to cope with the shortage. Global semiconductor industry sales increased 23.5% compared to the period of the previous year in November 2021, with a cumulative annual total of 1.05 trillion semiconductors sold through November 2021, the highest in the industry.

Impressive breakthroughs In industry, advanced technologies used in the chip manufacturing process and the possibility of passing the $ 52 billion CHIPS Act in the near term make the industry’s long-term growth prospects bright. The growing investor optimism in this space is evident in S&P Semiconductor SPDR ETFs (XSD) Gains of 22.8% over the last three months, compared to the ETF SPDR S&P 500 Trust (TO SPY) 10.7% yield. The global semiconductor chip market is expected to grow by 7.8% CAGR and reach $ 553.60 billion by 2026.

NVIDIA Corporation (NVDA) and Himax Technologies, Inc. (HIMX) are two leading players in the semiconductor industry. NVDA designs and manufactures computer graphics processors, chipsets and associated multimedia software for use in the gaming, professional visualization, data center and automotive markets. By comparison, Taiwan-based HIMX is a semiconductor solutions provider that manufactures display driver integrated circuits, digital camera solutions, and timing controllers used in many consumer electronics devices.

While HIMX has jumped 45.4% in the past three months, NVDA has gained 22%. Which of these titles is the best choice now?

Latest developments

On November 9, 2021, NVDA released the NVIDIA Omniverse Replicator, a powerful synthetic data generation engine that produces physically simulated synthetic data for training deep neural networks. He introduced two synthetic data generation applications to host the digital twin of autonomous vehicles and manipulation robots. Scheduled to launch next year, NVDA looks forward to helping developers create physically accurate and large datasets in order to create high-quality, high-performance, and secure datasets, which is essential for AI. .

On December 17, 2021, HIMX made a product update indicating that it has produced over one million units of the second generation of TDDI’s HX83192 series (touch and display integration) in the automotive cell , entered mass production in the third quarter after being widely adopted. by automakers, Tier 1 suppliers and panel manufacturers in all major automotive markets for new car models. HIMX expects sales of its second-generation automotive TDDI to grow exponentially.

Recent financial results

NVDA’s total revenue for its third quarter of fiscal 2022, ended September 30, 2021, increased 50.3% year-on-year to $ 7.10 billion. The company’s non-GAAP gross profit was $ 4.76 billion, a 53.8% year-over-year improvement. Its non-GAAP operating profit was $ 3.39 billion for the quarter, indicating a 69.9% increase over the prior year period. NVDA’s non-GAAP net income was $ 2.97 billion, up 62.1% from a year ago. Its non-GAAP EPS increased 12.5% ​​year-on-year to $ 1.17. The company had $ 1.29 billion in cash and cash equivalents as of October 31, 2021.

For its third quarter of fiscal 2021, ended September 30, 2021, HIMX revenue increased 75.4% year-over-year to $ 420.94 million. The company’s gross profit amounted to $ 216.73 million, an increase of 304.3% over the prior year period. HIMX’s operating profit was $ 148.24 million for the quarter, up 1,469.7% from the prior year period. While its net profit increased 1,304.8% year-on-year to $ 118.72 million, its EPS increased 1260% to $ 0.68. The company had $ 229.20 million in cash and cash equivalents as of September 30, 2021.

Past and expected financial performance

NVDA’s EBITDA and net income have grown at CAGRs of 26.5% and 20.5%, respectively, over the past three years. The company’s EPS has grown at a CAGR of 20.1% over the past three years.

Analysts expect NVDA’s EPS to grow 73.6% year-on-year for fiscal 2022 and 20% in 2023. Its revenue is expected to grow 60% year-on-year for fiscal year 2022 and 19% in 2023.

In comparison, HIMX’s EBITDA and net profit grew at CAGRs of 166.4% and 139.4%, respectively, over the past three years. The company’s EPS has grown at a CAGR of 139.9% over the past three years.

HIMX EPS is expected to grow 721.2% year-on-year in fiscal 2021 and 10.3% in 2022. The company’s revenue is expected to increase 74.2% year-on-year during fiscal year 2021. 2021 and 11.5% in 2022.

Evaluation

In terms of EV / futures sales, NVDA is currently trading at 27.29x, which is 1441.8% higher than HIMX’s 1.77x. In terms of non-GAAP P / E, HIMX’s 5.25x compares to NVDA’s 69.51x.

Profitability

NVDA’s last 12-month revenue is almost 17.7 times that of HIMX. However, HIMX is more profitable, with a 55.4% return on equity against 41.9% for NVDA.

Additionally, HIMX’s ROA and ROTC of 23.7% and 33.1% compare to NVDA’s 15.9% and 18.3%, respectively.

POWR odds

While HIMX has an overall rating of B which translates to Buying into our property POWR odds system, NVDA has an overall rating of C, equivalent to Neutral. POWR scores are calculated by considering 118 distinct factors, each weighted to an optimal degree.

NVDA and HIMX both have a B rating for growth, which matches their impressive growth over the past year. NVDA’s EBITDA increased 91.7% year-over-year, while HIMX’s EBITDA increased 1131.6% during the period.

HIMX has an A rating for stock, in line with its lower than industry valuations. HIMX has an EV / futures sales ratio of 1.77, 58% lower than the industry average 4.22x. NVDA’s D rating for value reflects its overvaluation. NVDA’s EV / Forward multiple of 27.29 is 546% higher than the industry average of 4.22 times.

Out of 99 shares rated A Semiconductor and wireless chip Industry, HIMX is ranked No. 42, while NVDA is ranked No. 67.

Beyond what we’ve stated above, our POWR rating system also rated NVDA and HIMX for quality, momentum, stability, and feeling. Get all NVDA Assessments here. As well, Click here to see additional POWR dimensions for HIMX.

The winner

As the industry is poised to grow significantly in the coming years, NVDA and HIMX stand to benefit. However, we believe that a relatively lower valuation and higher profit margins make HIMX a better buy here.

Our research shows that the odds of success increase when betting on stocks with an overall buy or strong buy POWR rating. Click here for access to the highest rated stocks in the wireless semiconductor and chip industry.


NVDA shares. Year-to-date, NVDA has fallen -0.41%, compared to a 0.55% increase in the benchmark S&P 500 over the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a particular interest in researching market inefficiencies. She is passionate about educating investors so that they can be successful on the stock market. Following…

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