We came across a bullish thesis on NVIDIA Corporation (NVDA) on Multibagger Nuggets’s Substack by Kris. In this article we will summarize the bulls’ thesis on NVDA. NVDA Technologies, Inc. share was trading at $119.10 as of Sept 13th.
Nvidia’s revenue growth has slowed but remains at impressive triple-digit percentages, which was anticipated. The company is expected to see additional revenue from its acquisition of Blackwell in Q4 2024 and Q1 2025. Evaluating Nvidia’s Return on Invested Capital (ROIC) over a normalized five-year period, including the pandemic, shows a solid performance. Its five-year ROIC stands at 54.77%, an increase of nearly 3%, demonstrating strong capital efficiency.
Despite Nvidia currently trading at a price-to-earnings (PE) ratio of 55.97, which may seem high, its forward PE ratio, after a recent price drop, is around 31.5. While this isn’t particularly cheap, it is justified given Nvidia’s high-quality business. Nvidia’s forward PEG ratio, currently at 31.46, is significantly undervalued when considering its projected earnings growth of 120% this year, giving a PEG of just 0.26 for 2024. A PEG under 1 is considered cheap, making this valuation extremely attractive.
Looking ahead to 2025, Nvidia’s earnings are expected to grow by 40%, with a forward PE of 26.7, resulting in a 2025 PEG of 0.67. Even further out, in 2026, earnings are expected to grow by 18.3%, with a forward PE of 22.55, giving a PEG of 1.23, still considered reasonable. While these figures for 2026 are more speculative, Nvidia’s historical performance suggests it can meet or exceed these expectations.
Some critics suggest that Nvidia is in a bubble due to its dramatic stock price rise—up 109% this year. However, this perception often focuses solely on price rather than valuation. Given that earnings are set to rise by 119%, Nvidia’s valuation has actually become more attractive, not less. The company’s ability to consistently beat expectations further supports its long-term growth potential.
Even renowned valuation expert Aswath Damodaran’s recent valuation of Nvidia at $87—17% below the current price—appears overly conservative. His previous valuations similarly underestimated Nvidia, and the company surpassed those projections. In light of these factors, Nvidia’s numbers indicate that it is not in a bubble, and the stock remains a buy at current levels.
NVIDIA Corporation is on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 179 hedge fund portfolios held NVDA at the end of the second quarter which was 186 in the previous quarter. While we acknowledge the risk and potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.