You might be able to find a better investment than NVIDIA. Our free balance sheet analysis for NVIDIA with six simple checks will allow you to discover any risks that could be an issue. Unless these conditions improve, it's challenging to accept these prices as being reasonable.Ī lot of potential risks can sit within a company's balance sheet. Right now we are uncomfortable with the relatively high share price as the predicted future earnings aren't likely to support such positive sentiment for long. We've established that NVIDIA currently trades on a higher than expected P/E since its forecast growth is only in line with the wider market. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations. These shareholders may be setting themselves up for disappointment if the P/E falls to levels more in line with the growth outlook. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. With this information, we find it interesting that NVIDIA is trading at a high P/E compared to the market.

Meanwhile, the rest of the market is forecast to expand by 9.5% per annum, which is not materially different. Turning to the outlook, the next three years should generate growth of 11% each year as estimated by the analysts watching the company. Therefore, it's fair to say the earnings growth recently has been superb for the company. This was backed up an excellent period prior to see EPS up by 176% in total over the last three years.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 8.8% last year.

NVIDIA's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Nvda price snap