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Nvidia got cheaper based on a key valuation metric after its recent earnings.
Dream time
If you liked the stock then, you should still like it now.
shares in
nvidia
(Stock symbol: NVDA) this year, boosting the entire stock market and raising the stock level
Standard & Poor’s 500
And
Nasdaq
Pointers as a chip maker have become a major way to drive the AI frenzy. Despite the gains, the company’s recent earnings mean its valuation on a critical metric is actually becoming more reasonable.
The forward price-to-earnings ratio, which measures the current price of a stock compared to earnings in the future, often the following year, is a widely used method for tracking a company’s value and what people will pay for its stock. He appears
nvidia
Shares are now cheaper than they have been since January 5th, even though the stock is up 250% since then.
This is the math. Nvidia’s latest results, and especially its forecasts, have been so good that analysts have dramatically increased their forecasts for the company’s future earnings, suddenly making the price of forward earnings look more attractive. As of July 31, the consensus among analysts surveyed by FactSet was for earnings of $7.95 per share in fiscal year 2024 and $11.53 in fiscal year 2025.
By Friday morning, earnings per share estimates had risen to $10.60 and $16.51 for the years 2024 and 2025, respectively. In contrast, Nvidia’s forward P/E — the price relative to projected earnings over the next 12 months — has fallen because the denominator in this ratio is much higher.
As a result, the stock looks cheaper. Much cheaper. Nvidia was trading at a forward EPS of 33.8 on Friday, down from 43 before its earnings and at the lowest level since Jan. 5.
Similar conclusions can be drawn from Nvidia’s price-to-earnings ratio — price-to-earnings over the past 12 months. This is a metric that bearish traders may take seriously because it does not take into account what could be consensus exaggerated estimates of future earnings.
Nvidia traded at an EPS of 113.8 on Friday, down from roughly 245 on Wednesday, before earnings. This was the lowest level since March 28, when the stock closed at $269.84. Shares opened above $502 Thursday after earnings, which is up 86%.
Valuation tools such as forward or future P/E ratios aren’t all that stocks are worth, but they are a good starting point. And for investors trying to navigate the haze of post-earnings analysis, they provide a reminder that those who thought the stock value was fair in January may be thinking the same thing now.
Write to Jack Denton at [email protected]
(tags for translation) Computers/Consumer Electronics
