Is NVIDIA Corporation (NASDAQ:NVDA) Potentially Undervalued?

Let's talk about the popular NVIDIA Corporation (NASDAQ:NVDA). The company's shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at NVIDIA’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for NVIDIA

Is NVIDIA Still Cheap?

The stock is currently trading at US$455 on the share market, which means it is overvalued by 33% compared to my intrinsic value of $341.82. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that NVIDIA’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of NVIDIA look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. NVIDIA's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? NVDA’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe NVDA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on NVDA for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for NVDA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 1 warning sign for NVIDIA you should be aware of.

If you are no longer interested in NVIDIA, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for NVIDIA?

NasdaqGS:NVDA

NVIDIA

NVIDIA Corporation provides graphics, and compute and networking solutions in the United States, Taiwan, China, and internationally.Show more

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Rewards

• Earnings are forecast to grow 30.99% per year

• Earnings grew by 33.1% over the past year

Risks

• Significant insider selling over the past 3 months

View all Risks and Rewards

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.