NVIDIA (NVDA) reported strong financial results this week for the second quarter of fiscal year 2025, ending July 28, 2024, although the stock sold off some due to the high expectations embedded in it. The company achieved record quarterly revenue of $30.0 billion, representing a 15% increase from the previous quarter and a remarkable 122% year-over-year growth. This performance significantly surpassed the earlier outlook of $28 billion. The company’s GAAP diluted earnings per share rose to $0.67, a 12% increase from the previous quarter and a 168% jump year-over-year.
Given the stock’s incredible run, we thought it might be a good time to see how it stacks up according to our guru models, which are based on historically successful investors like Warren Buffett, Peter Lynch and Martin Zweig, and the investing factors that academic research have proven to work over time.
Here is how NVIDIA stacks up.
Twin Momentum Investor (Score: 100%)
NVIDIA excels in the Twin Momentum strategy, which focuses on both fundamental and price momentum. The company’s fundamental momentum of 13.01% places it in the 6th percentile of Validea’s database, indicating strong performance. The twelve-minus-one-month return of 110.56% ranks NVIDIA in the 4th percentile, demonstrating exceptional price momentum. This combination of strong fundamental and price momentum results in NVIDIA ranking in the top 1st percentile, easily passing this model’s criteria.
Quantitative Momentum Investor (Score: 94%)
NVIDIA performs exceptionally well in the Quantitative Momentum model. The company’s twelve-month minus one-month return of 110.56% places it in the top 4% of stocks, meeting the strategy’s preference for strong intermediate-term momentum. NVIDIA’s return consistency score of -10.32% ranks in the 4th percentile, indicating highly consistent positive returns. These factors contribute to NVIDIA’s high score in this momentum-focused strategy.
Growth/Value Investor (Score: 80%)
In James O’Shaughnessy’s Growth/Value strategy, NVIDIA meets several key criteria. Its market cap of $2,884,483 million easily surpasses the $1 billion minimum. The cash flow per share of $2.23 exceeds the market mean of $1.67. With 24,530 million shares outstanding, it passes the requirement for well-known, highly traded companies. NVIDIA’s trailing 12-month sales of $96,307 million are more than 1.5 times the market mean. However, the dividend yield of 0.03% fails the final criterion, preventing a perfect score in this model.
Growth Investor (Score: 69%)
Martin Zweig’s Growth Investor strategy presents a mixed picture for NVIDIA. The company’s EPS growth rate of 99.18% (based on the average of 3, 4, and 5-year historical EPS growth rates) is impressive, far exceeding the minimum 15% annual growth rate required. The company also passes tests for earnings persistence and stability. However, NVIDIA fails the P/E ratio test, with its P/E of 55.23 being well above the acceptable range (not more than 3 times the current Market P/E of 28.00). The company’s low debt/equity ratio of 14.55% is a positive factor in this model.
Momentum Investor (Score: 64%)
In the Momentum Investor model, NVIDIA shows strength in several areas. Its quarterly EPS change of 168.00% year-over-year is well above the 18% minimum sought by this methodology. The annual earnings growth rate of 51.22% over the past five years is impressive. NVIDIA’s relative strength of 96 is exceptional, indicating strong market performance. However, the stock fails the current price level test, as it’s not trading within 15% of its 52-week high.
NVIDIA’s latest earnings report reinforces its position as a leader in the AI and advanced computing space. The company’s exceptional revenue growth, strong earnings performance, and dominant market position are reflected in its high scores in momentum and growth-oriented strategies.
However, NVIDIA’s success and the resulting high valuation continue to present challenges in more value-oriented approaches. The stock’s high P/E and P/B ratios, while justified by its growth rates, prevent it from scoring well in traditional value investing models.
For investors, NVIDIA represents a classic growth stock – one with tremendous momentum and market leadership, but at a premium valuation. The company’s ability to consistently beat high expectations and its central role in the AI revolution suggest that its growth trajectory may continue. However, value-conscious investors may need to weigh the potential for continued growth against the risks associated with high valuations.
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