Image Source: Pixabay

Nvidia (NVDA) has been the star of the market over the past few years — a powerhouse that has reshaped artificial intelligence, gaming, and high-performance computing. Is Nvidia still a buy? With its stock price reaching seemingly gravity-defying heights, many investors are asking: is there still room to run, or is this as good as it gets?

(Click on image to enlarge)

Using FAST Graphs, we’re going to take a fundamentals-first approach to Nvidia’s business, valuation, risk profile, and future expectations. This isn’t hype — it’s a data-driven look at one of the most valuable companies in the world.

Understanding the Current Market Hype

Nvidia (NVDA) has grown from a graphics card company into the backbone of the modern AI infrastructure. From powering ChatGPT to training machine learning models for Fortune 500 firms, its GPUs are now considered mission-critical.

But with Nvidia now sitting above a $4 trillion market cap, investors have a right to be cautious. Can a stock still deliver long-term returns at that size? Or are investors chasing yesterday’s growth?

FAST Graphs Valuation Overview
We started with a high-level chart in FAST Graphs, plotting:

• Price (black line)
• Adjusted Earnings Per Share (green shaded area)
• Fair Value Estimate (orange line)
• Historical PE Multiples (blue line)
• Current PE Ratio (47.5x)

Key Takeaway: Nvidia is currently trading well above its long-term average valuation, but this is not entirely out of line with how the market has historically priced periods of hypergrowth. What looks “expensive” through one lens can be justified when growth is truly exceptional — which, in Nvidia’s case, it is.

Explosive Earnings and Revenue Growth

Nvidia has produced a compound annual earnings growth rate of 50% since 2018 — and that includes a mix of actuals and forward estimates.
Specific annual highlights:

• 288% earnings growth in a single year
• 131% growth projected for 2025
• 45% expected for 2026

On the revenue side, the company has maintained a 41% CAGR, demonstrating that this isn’t just margin manipulation — it’s top-line expansion backed by global demand.

Cash Flow Analysis — Where Nvidia Really Shines

If there’s one metric that separates Nvidia from other high-growth tech names, it’s cash flow.

• Operating Cash Flow has ballooned from $5B in 2023 to over $64B
• Capex is minimal, resulting in nearly 1:1 free cash flow efficiency
• Free Cash Flow ≈ Operating Cash Flow, meaning Nvidia isn’t burning capital to grow

For investors who care about shareholder yield, this is gold. Nvidia has the flexibility to:

• Invest
• Acquire
• Return capital
• Or simply build a war chest

As of the most recent period, Nvidia has an increasingly cash-rich balance sheet, with cash and short-term investments rising sharply.

Margin Explosion

Margins tell the story of operational dominance — and Nvidia’s margins are nothing short of elite.

• Gross Margin CAGR: ~3%
• Net Margin CAGR: ~15%
• Net margin has increased from 13.5% to 55%

That means over half of every dollar in revenue is flowing through to the bottom line. For a company of this size, that level of profitability is almost unheard of. Even with a brief earnings miss in 2023, Nvidia’s margin structure recovered quickly and now reflects extreme efficiency.

Future Outlook — What Do Analysts Expect?

Using FAST Graphs, we reviewed analyst forecasts through 2028. The expectation is that operating cash flow will grow at a 28% CAGR through that time.

We also looked at the FAST Graphs Analyst Scorecard, which evaluates how accurate analyst projections have been over time. Nvidia scores strongly — meaning we can place a higher degree of confidence in these forward-looking numbers.

While 28% may sound like a drop compared to the 50% we’ve seen recently, it’s still extremely strong for a company of Nvidia’s scale.

Valuation Risk and Reward

Let’s talk risk.

At a 47x PE, Nvidia is expensive on an absolute basis. But for a company growing earnings at 40-50% per year and generating massive free cash flow, a premium is warranted.

Still, here are the key risks to monitor:

• Valuation Compression: If growth slows, multiple contraction could be sharp
• Supply Chain Risk: Heavy reliance on TSMC
• Competitive Threats: AMD, Intel, and eventually custom in-house chips from major cloud providers
• AI Saturation: Is the growth sustainable, or will demand plateau?

The bottom line is that while the risk is real, the rewards could still justify it — especially for long-term investors who can weather volatility.

Final Verdict

Nvidia is not a meme stock. It’s not speculative. It’s a data-backed juggernaut producing:

• Consistent earnings growth
• Massive cash flow
• Incredible margins
• Forecasts that continue to rise

Is it expensive? Yes.
Is it overhyped? Not necessarily.
Is it still investable? For the right investor — absolutely.

If you’re looking for a high-conviction, long-term holding and are willing to pay up for quality, Nvidia deserves your attention.

Video Length: 00:12:24

More By This Author: