Stock Analysis

At US$597, Is It Time To Put NVIDIA Corporation (NASDAQ:NVDA) On Your Watch List?

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NasdaqGS:NVDA
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Let's talk about the popular NVIDIA Corporation (NASDAQ:NVDA). The company's shares received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? 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.

See our latest analysis for NVIDIA

Is NVIDIA Still Cheap?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 78.01x is currently well-above the industry average of 27.38x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that NVIDIA’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will NVIDIA generate?

earnings-and-revenue-growth
NasdaqGS:NVDA Earnings and Revenue Growth January 23rd 2024

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for NVIDIA. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in NVDA’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe NVDA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on NVDA for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for NVDA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 1 warning sign for NVIDIA and we think they deserve your attention.

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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