Nvidia Stock Won't Be Overvalued by 2028: My Case for Buying NVDA Today
Key PointsNvidia looks expensive, but its valuation is relatively modest compared with its historical levels given its extraordinary growth.
In the latest stock performance, Nvidia (NASDAQ: NVDA) saw a 8.7% increase following the release of strong earnings and a bullish outlook from management. This comes after the stock's valuation multiple had reached multiyear lows, despite ongoing AI dominance and compounding earnings growth. By 2028, if Nvidia adheres to its current guidance, this stock could be considered a great buy at its present price.
Upon examining Nvidia, one should begin with the mathematical analysis. The stock is currently trading at a mid-30s trailing price-to-earnings ratio and a low-20s forward price-to-earnings ratio, which are both below its 10-year average and significantly lower than the 50-plus multiples it commanded earlier in the AI boom. Furthermore, Nvidia's price-to-earnings-to-growth (PEG) ratio, which compares valuation to expected growth, hovers near 0.5, indicating that the market is not overpaying for the anticipated growth analysts are projecting in the coming years.
In simpler terms, investors are paying a premium, but it is a smaller premium compared to what they previously paid for Nvidia, and this premium has decreased even as the company's business has flourished.
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