Back in April 2024, amidst Nvidia’s impressive 500% rise over just 18 months, Anthony Summers, our Director of Trading, took a slightly unusual stance. In his Value Meter column, he declared Nvidia to be “Slightly Undervalued.”
Skeptics might have questioned how much further the stock could climb, but Anthony’s assessment turned out to be right on the money. Within the seven months that followed, Nvidia’s share price skyrocketed by another 69%.
Now, with all the uncertainty surrounding the tech sector today, the big question remains: Is this AI powerhouse still a good buy? Let’s dive in to see what the numbers say.
Transforming itself from a mere gaming graphics card company to a trailblazer in AI computing, Nvidia (Nasdaq: NVDA) has certainly made a mark since the turn of the century. The company’s claim to fame was inventing the graphics processing unit (GPU) back in 1999, under the leadership of CEO Jensen Huang. His vision for accelerated computing has propelled Nvidia to the forefront of the AI boom.
Nowadays, Nvidia’s technology fuels everything from gaming laptops to vast data centers, autonomous vehicles, and AI-production facilities across the globe. Every major cloud service provider and AI entity depends on Nvidia’s cutting-edge chips, software, and networking solutions.
Consider this: Nvidia’s Data Center division alone racked up an astounding $115.2 billion in revenue for fiscal year 2025—an increase of 142% from the previous year. Plus, they’re rolling out their next-gen Blackwell architecture chips, which are already in high demand for AI-related tasks.
The company reported enormous total revenue of $130.5 billion for fiscal 2025, marking a 114% rise from the previous year. Looking ahead, Nvidia predicts first-quarter 2026 revenue will reach $43 billion, a growth of 10% over the recent quarter.
The capability to generate over $60.7 billion in free cash flow in fiscal 2025—up from $26.9 billion the year before—is nothing short of remarkable. Nvidia’s gross margins, sitting at about 75%, make it one of the most profitable tech firms out there.
However, despite its impressive performance, Nvidia’s stock has taken a hit recently due to general unease about the tech industry and the broader market. After plunging to lows around $10 in 2022, the stock surged more than fifteenfold, only to drop nearly 25% since then.
This dramatic rise and subsequent fall have left many investors in a quandary. Those yet to jump in might fret they’ve missed their chance, while current stockholders could be tempted to sell.
When you first glance at Nvidia’s enterprise value-to-net asset value (EV/NAV) ratio of 36.7, it might raise eyebrows, as it’s massively higher than the industry average of 6.12 for similar companies. Normally, this would have value-driven investors shouting “overvalued,” but here’s the twist.
Nvidia’s free cash flow-to-net assets (FCF/NAV) ratio stands out at 26.56%, blowing past the industry average of 8.28%. Essentially, they’re extracting over three times the cash per asset dollar compared to their peers.
What fuels these extraordinary figures? Simply put, Nvidia is the go-to provider in the AI gold rush, offering necessary tools and technology.
Although some may hesitate at Nvidia’s high valuation, the Value Meter reveals a company that’s not only expanding rapidly but also maintaining exceptional profitability. The extraordinary free cash flow suggests that its premium price is not only justified but potentially understated.
In a landscape riddled with speculative AI ventures, Nvidia is a cash-generating powerhouse steering a monumental technological shift. Long-term investors who are willing to weather short-term turbulence might find Nvidia to be a compelling option, despite its soaring stock price.
Our Value Meter continues to label it “Slightly Undervalued.”
I’m curious—what stock should I evaluate with The Value Meter next? Let me know what you’re interested in!
