While a lot of major indexes are near all-time highs at the moment, there’s still value to be found in the stock market today. Look below the surface and you’ll find that there are plenty of companies trading on low price-to-earnings (P/E) and price-to-earnings-to-growth (PEG) ratios.
One stock that I see a lot of value in right now is Nvidia (NASDAQ: NVDA). That might sound crazy given that it’s the largest company in the world today (and everyone knows it) but it actually looks super cheap relative to its rate of growth.
Could Nvidia be a value stock?
For the financial year starting in February 2027, analysts expect Nvidia to generate earnings per share (EPS) of $12.70 – 42% higher than the figure expected for this financial year. That means that at today’s share price of $205, the forward-looking P/E ratio is only about 16.
That valuation is well below the US market average. It’s also well below the valuations on most other AI chips stocks (for instance, AMD is on 37).
Importantly, it’s very low relative to the company’s growth. Taking that 42% growth forecast, we get a PEG ratio of just 0.38.
That screams value to me. With this metric, a ratio under one signals that a stock is cheap so a ratio of 0.38 means that Nvidia is very cheap relative to its growth.
Wall Street sees near-50% gains ahead
Looking at analysts’ price targets, I’m clearly not the only one who believes Nvidia is undervalued at the moment. Here are some recent price targets from Wall Street firms:
- Truist Securities: $307
- Baird: $500
- Cantor Fitzgerald: $350
- Melius: $400
- Bernstein SocGen: $315
All of these targets are miles above the current share price. Note that the average price target is $298 – nearly 50% above today’s share price.
Strong potential from here
Now, of course, there are no guarantees that the earnings forecast for FY27 will come to fruition. Here, we’re making an assumption that demand for Nvidia’s AI chips will continue to be strong over the next 18 months (it may not be).
As for the broker price targets, these need to be taken with a pinch of salt, especially the higher ones). Often price targets aren’t hit within the expected timeframes (price targets are generally made on a 12-month basis).
All things considered though, I do see the stock as very cheap today given its prolific rate of growth and dominant market share in the AI space. So, I’ve been buying more shares for my portfolio in recent weeks and believe other investors should take a closer look at them.
The share price may not shoot up in the short term. But taking a three-year view, I see the potential for strong gains from current levels given the forecast growth of the artificial intelligence market.
Should you invest £5,000 in Nvidia right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nvidia made the list?
Edward Sheldon owns shares in Nvidia
