Nvidia is right: Its stock is a bargain by this measure

Nvidia's stock has become less expensive on a valuation basis even as the company has continued to post strong growth, according to a recent analysis. The observation rests on the idea that a stock's price-to-earnings ratio can fall even while its share price rises — provided earnings grow faster than the share price. In Nvidia's case, sustained revenue and profit expansion have outpaced its market gains, compressing its multiple relative to earlier periods.

For investors, the key takeaway is that valuation is a moving target tied to fundamentals, not just price. A lower P/E can mean the market is pricing in more modest expectations, or it can simply reflect earnings catching up to the share price. The distinction matters: multiple compression driven by rapid earnings growth is different from a decline driven by falling profit forecasts.

What to watch is whether that growth trajectory holds. Forward estimates, data-center demand, and competitive dynamics will shape whether the current multiple looks reasonable or optimistic in hindsight.