Davies recruited Nugent for Preston from Bury for £99,000 two years ago before taking up the managerial reins at Pride Park a season later.
He said: "What did we have to work on? Everything.
"His left foot was poor, his heading was poor, his fitness should have been better and his timekeeping and discipline at times was not up to scratch.
"But I saw fantastic material, a player of great potential and someone we could improve. I saw individual ability and a willingness to run at defenders.
"He had pace and was a finisher. He is also a player who has come from a certain area with a passion and desire to succeed. He understood there were certain things he had to do and certain things he had to improve on and he certainly improved.
"It was all about chipping away at his game. Nuge has worked extremely hard to come such a long way. He has matured into an outstanding young player.
"I'm delighted for him because of the work he has put in, but I hope we stuff them in the first league match."