NVIDIA Corporation (NASDAQ:NVDA) shares have seen a massive 70% increase on the NASDAQGS over the past few months. The recent share price increase has brought the company close to its yearly high. With many analysts covering this large stock, we would expect any price-sensitive announcements are already priced into the share price. But is the stock still trading at a relatively cheap price? Let’s take a look at NVIDIA’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for NVIDIA
What is the opportunity for NVIDIA?
According to our price multiple model, which compares the company’s price-to-earnings ratio to the industry average, the company’s stock price currently looks expensive. In this example, we used the price-to-earnings ratio because there is not enough visibility to forecast cash flows. The company’s stock price of 74.56x is currently well above the industry average of 31.27x, meaning it is trading at a premium relative to its peers. But could there be another opportunity to buy low in the future? Since NVIDIA’s stock price is very volatile, this means that the stock price could fall further (or rise further) in the future, giving us another chance to invest. This is based on the company’s high beta. Beta is a good indicator of how volatile a stock is compared to the overall market.
What does the future hold for NVIDIA?
Revenue and income growth
Growth investors in their portfolio may wish to consider the prospects of a company before buying its shares. While value investors would argue that it’s the intrinsic value relative to the price that matters most, a more compelling investment argument is high growth potential at a low price. NVIDIA’s revenue is expected to double over the next few years, giving it a very bright future. This should strengthen cash flows and drive the stock price higher.
What this means for you
Are you a shareholder? NVDA’s optimistic future growth seems to be priced into the current share price, with the stock trading above the industry price-to-earnings multiple. At the current share price, shareholders may be asking another question: should I sell? If you believe NVDA should trade below its current price, you could potentially make a profit by selling at a higher price and buying back when the stock price falls towards the industry price-to-earnings multiple. Before making this decision, however, check whether NVDA’s fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on NVDA for a while, now may not be the best time to buy shares. The price is outperforming its peers, which means there is likely no more room for upside from mispricing. However, the optimistic outlook is encouraging for NVDA, which means it’s worth digging deeper into other factors to take advantage of the next price drop.
The story continues
With this in mind, if you want to analyse this company further, it’s important to know about the risks involved, For example, NVIDIA has 1 warning sign you should know about.
If you are no longer interested in NVIDIA, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
Have something to say about this article? If you have any questions about the content, please contact us directly or email us at editorial-team@simplywallst.com.