By Dr. James Fox
Publication Date: 2026-02-08 07:15:00
Image source: Getty Images
The argument that Nvidia (NASDAQ:NVDA) stock’s expensive is very hard to sustain in the current environment. Over the past six months, it’s actually down around 3%, but the company has continued to deliver incredible operational data while its customers continue to plough money into artificial intelligence (AI) hardware.
With its FY26 now over, the forward price-to-earnings (P/E) ratio (for the coming 12 months) sits at just 22.6 times. That’s less than the Nasdaq and S&P 500 averages. And this is a company that sits at the heart of the AI revolution, continually proves its technologically far ahead of its peers, and has a whopping 58.8% operating margin.
Maybe earnings are about to go into reverse… after all, the P/E ratio can be incredibly misleading when companies are in a state of decline.
Well, that’s not the case here. Analysts point to an average annual earnings growth rate of 37.5% over the medium term. Personally, I think this points to growth at a very reasonable price. And that’s confirmed by the price-to-earnings-to-growth (PEG) ratio — P/E divided by forward growth rate — which sits at 0.6.
What’s more, applying this growth rate, in just three years, the company’s earnings would more than double (160% total growth). If the stock price stayed the same while earnings doubled, the P/E ratio would drop from 22.6 to about 8.7 times.
The long-term champion thesis
It is…
