(CTN News) – Perhaps Nvidia’s (NVDA) stock is not excessively overvalued despite its impressive 237% gain this year, as there is fierce competition to unleash new AI capabilities worldwide.
According to veteran tech analyst Paul Meeks, Nvidia can become the world’s most valuable company, but he is not confident enough to make that claim yet.
Nvidia is considered a leader in the AI field due to its chips powering OpenAI’s ChatGPT platform. Additionally, the company has secured significant generative AI chip deals with ServiceNow (NOW) and Snowflake (SNOW), further solidifying its position.
The high demand for Nvidia’s products has led to an upward revision in profit forecasts by Wall Street analysts. Just three months ago, the projected earnings per share for the current fiscal year were $10.76, but now it stands at $12.29 per share.
Nvidia’s profits for the upcoming fiscal year are projected to increase by at least 67% compared to the previous year, reaching $20.50 per share. This is a significant improvement from the initial estimate of $16.71 per share made three months ago by analysts.
According to data from Yahoo Finance, the stock has shown an impressive triple-digit return in 2023, resulting in a trailing twelve-month price-to-earnings ratio (PE) of 65. This is nearly three times higher than the trailing PE of the S&P 500.
However, analysts consulted by Yahoo Finance believe that Nvidia’s stock still appears to be undervalued when considering other valuation metrics. For example, the stock has a PEG (price to expected earnings growth) ratio of only 0.5 times, which is often seen by Wall Street as a potentially undervalued opportunity when it falls below 1.
In terms of the forward PE ratio, Nvidia’s stock is currently valued at 24.5 times expected earnings, which is not significantly different from the S&P 500’s forward multiple of 21.