Nvidia currently trades at $188.00 and has been a dream stock for shareholders. It’s returned 1,390% since January 2021, blowing past the S&P 500’s 82.9% gain. The company has also beaten the index over the past six months as its stock price is up 18.8% thanks to its solid quarterly results.
Is now still a good time to buy NVDA? Or are investors being too optimistic? Find out in our full research report, it’s free for active Edge members.
Why Is NVDA a Good Business?
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ: NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Nvidia grew its sales at an incredible 66.2% compounded annual growth rate. Its growth beat the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Nvidia’s EPS grew at an astounding 79.1% compounded annual growth rate over the last five years, higher than its 66.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Nvidia has shown terrific cash profitability, and if sustainable, puts it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the semiconductor sector, averaging an eye-popping 44.6% over the last two years.
Final Judgment
These are just a few reasons why Nvidia ranks near the top of our list, and with its shares topping the market in recent months, the stock trades at 27× forward P/E (or $188.00 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More Than Nvidia
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