Do you think Nvidia is expensive? This Candlestick may change your mind. Danny Vena, Motley Fool 7:31 PM, December 11, 2024 (Wed).
Recent advances in Artificial Intelligence (AI) could have a significant impact on our lives. The ability to automate and streamline tasks, as well as create unique content, may improve productivity and potentially save time and money.
One of the companies at the forefront of this trend is Nvidia (NASDAQ: NVDA). Their Graphics Processing Units (GPUs) are the gold standard used to support this innovative technology, driving soaring sales, profits, and ultimately a stratospheric rise in stock price.
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At the time of writing this article, Nvidia has risen by 850% since the beginning of last year, but the valuation has also been seen. The company currently has a price-to-earnings ratio (P/E) of 55, far exceeding the S&P 500's multiple of 31. It may seem expensive at first glance, but appearances can be deceiving, and the stock is not as expensive as you might think.
History is valuable.
Valuation metrics are useful tools for evaluating whether stocks are fairly priced, but they should not be considered in a vacuum. For example, if there is a strong likelihood of future growth, market dominance, or a history of strong innovation, stocks can trade at a premium. Nvidia meets all these criteria, explaining why investors are willing to pay a premium for the shares.
For example, in the fourth quarter ending on January 28, Nvidia reported revenues of $37.5 billion, representing a 70% year-on-year growth, with profitability to match. Nvidia is estimated to control between 70% and 95% of the advanced AI chip market, leaving breadcrumbs for rivals. Furthermore, Nvidia's history of innovation continues with its Blackwell AI processor, the most powerful AI-centric processor ever built.
However, according to a certain chart, Nvidia is not as expensive as one might think.
One of the companies at the forefront of this trend is Nvidia (NASDAQ: NVDA). Their Graphics Processing Units (GPUs) are the gold standard used to support this innovative technology, driving soaring sales, profits, and ultimately a stratospheric rise in stock price.
Start your morning smarter! Every day, breakfast news will be delivered to your Market Day inbox. Sign up for free »
At the time of writing this article, Nvidia has risen by 850% since the beginning of last year, but the valuation has also been seen. The company currently has a price-to-earnings ratio (P/E) of 55, far exceeding the S&P 500's multiple of 31. It may seem expensive at first glance, but appearances can be deceiving, and the stock is not as expensive as you might think.
History is valuable.
Valuation metrics are useful tools for evaluating whether stocks are fairly priced, but they should not be considered in a vacuum. For example, if there is a strong likelihood of future growth, market dominance, or a history of strong innovation, stocks can trade at a premium. Nvidia meets all these criteria, explaining why investors are willing to pay a premium for the shares.
For example, in the fourth quarter ending on January 28, Nvidia reported revenues of $37.5 billion, representing a 70% year-on-year growth, with profitability to match. Nvidia is estimated to control between 70% and 95% of the advanced AI chip market, leaving breadcrumbs for rivals. Furthermore, Nvidia's history of innovation continues with its Blackwell AI processor, the most powerful AI-centric processor ever built.
However, according to a certain chart, Nvidia is not as expensive as one might think.
NVIDIA may seem expensive at 55 times earnings, but when compared to the 5-year average multiple of 81, it is a good buy. Furthermore, NVIDIA is trading at 32 times next year's estimated earnings, making it an attractive price, especially considering the growth prospects.
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NOIR(のあ) : I don't think NVDA's stock price is keeping up with earnings. This is growth even though it is a large company competing for the highest market capitalization in the world. There is no sense that it is expensive. It's easy to think that it's expensive due to a sharp rise in stock prices, and people say growth is slowing down, but I don't think that's the case
Kimihiko OP NOIR(のあ) : Thanks for commenting ♪
That's right