Nvidia Looks 22% Undervalued Here Based on Projected FCF Margins - $230 Price Target

Core Viewpoint - Nvidia, Inc. (NVDA) stock is considered undervalued by at least 22%, with a strong free cash flow (FCF) margin of 39% and a 2.0% FCF yield valuation metric [1] Financial Performance - For the quarter ended July 27, 2025, Nvidia generated $13.45 billion in free cash flow on $46.743 billion in revenue, resulting in a quarterly FCF margin of 28.8% [3] - Over the past three quarters, Nvidia's FCF margins were 59.43% (Q1), 39.54% (Q4 2024), and 47.93% (Q3 2024) [3] - The trailing 12 months (TTM) FCF margin averaged 43.9% [4] Future Projections - Assuming a conservative FCF margin of 39% for the next 12 months, projected revenue for the year ending January 2027 is $287.24 billion, leading to an estimated FCF of $112.02 billion [4] - If Nvidia maintains a similar FCF margin of 29% in the upcoming Q3 earnings release, the TTM margin would adjust to 39.15% [4] Valuation Metrics - Using a conservative FCF yield metric of 2.0%, if Nvidia were to pay out 100% of its projected $112 billion in FCF next year as a dividend, the theoretical dividend yield would be 2.0% [6] - Nvidia's TTM FCF is reported at $72 billion, with a current market cap of $4.581 trillion [5]