Is Nvidia Really the Top Stock to Buy Right Now? Let's Dive In

If you're following popular sentiment, Nvidia seems like the stock to buy. But is the hype justified, or is there more to the story? Today, we're diving deep into Nvidia’s potential, and after that, I’ll highlight four additional stocks that top value investors believe are worth considering right now.

Nvidia’s Unstoppable Growth – Impressive or Too Much?

Nvidia has been a force to be reckoned with, consistently reaching all-time highs. Let’s look at the numbers: up 2,800% over the past five years, 234% over the last year, and a whopping 198% year-to-date. That's essentially tripling your money in under a year! Nvidia’s value extends far beyond these stock price increases, though. Let’s break down the income statement to understand why the company keeps breaking records.

In just five years, Nvidia’s revenue soared from $5 billion to $96 billion. Today, it stands at a jaw-dropping $3.5 trillion market cap. That gives it a price-to-sales ratio of 35, which might seem high but reflects Nvidia’s massive growth. As a value investor, it’s tempting to focus solely on ratios. But I’ll tell you this: value investing isn’t just about getting a stock at a “good deal” – it’s about understanding a company’s future cash flow potential. Nvidia’s cash flows are growing, which makes it a company worth paying a premium for.

Nvidia’s Future Growth – Worth the Investment?

The real question isn’t just about Nvidia’s potential; it’s about how likely it is to meet these expectations. For example, if Nvidia can quintuple its earnings per share from $1.27 to $5.83 in a few years, it could be a solid buy. Analysts project revenue growth from $60 billion to $250 billion in five years – that’s a fourfold increase. But let’s test this optimism with the Stock Analyzer Tool.

Stock Analyzer Tool Results

To forecast Nvidia’s potential, I used growth rates of 10%, 20%, and 30% over ten years. With a profit margin estimate between 30% and 50%, and a PE of 20 to 30, we get an intrinsic value range from $36 to $385. Adding a margin of safety and aiming for a higher return (12.5%), Nvidia’s value falls between $28 and $285. At the end of the day, I’ve set a personal watchlist price of $80 per share. While Nvidia is currently soaring, I’d prefer to wait for a more reasonable entry point.

What Top Investors Are Buying – Four Stocks to Watch

Now, let’s look at some undervalued companies frequently discussed by members of the exclusive Value Investors Club. Created by Joel Greenblatt, this club shares in-depth pitches on promising companies – but only to those who prove their analysis chops. Here are four that caught my attention:

• Tesla (TSLA)

1. • Tesla has the potential to become the most valuable company if it succeeds with full self-driving (FSD). But if FSD doesn’t deliver, Tesla’s value could drop by as much as 90%. Even though Tesla has doubled its revenue and profit, the high expectations tied to FSD are risky. If you’re willing to take a chance, this might be for you.

• Match Group (MTCH)

1. • Match Group, a giant in online dating, has seen a significant drop in stock price from $160 to $37 since 2021. Yet revenues have grown 16%, cash flows are up 93%, and earnings have risen 134%. Tinder and Hinge dominate the market, with 70% of U.S. singles still not on dating apps. With its strong cash flow and plenty of runway, Match Group is a solid pick for value investors.

• Dollar General (DG)

1. • Dollar General targets a lower-income consumer base, and while recent economic trends have hit it hard, its fundamentals are sound. 12,000 new stores are planned for rural areas, with new stores delivering 18% to 20% returns. While DG’s stock has dropped about 70%, its cash flow potential suggests a comeback could be in the works.

• Crocs (CROX)

1. • Known for its unique footwear, Crocs has diversified with brands like Hey Dude. Despite facing a lot of skepticism, Crocs has shown resilience. Analysts project its revenue growth at around 4-5% annually, and the company has an active buyback plan. Crocs could be a valuable addition for those looking for a steady growth stock with high insider confidence.

The Key to Value Investing – Process Over Hype

The takeaway? Don’t just buy what everyone else is buying. Understand a company’s cash flow and growth potential. All investments, including Nvidia, Dollar General, and Tesla, come down to the likelihood of meeting optimistic projections. As a value investor, the goal is to find a stock trading below its intrinsic value – one that has misunderstood fundamentals or overlooked growth potential.

To make informed choices, I always encourage our community members to try out tools like the Stock Analyzer and Retirement Calculators. Our community is a great place to learn, ask questions, and gain insights from like-minded investors. We recently rolled out updates, simplifying access to these tools and improving the user experience for serious investors.

Everything Money is Not an Investment Advisor: Everything Money (including Paul, Mo, and Any other person including, but not limited to, other staff members, guests, personalities, etc.) is not an investment adviser, and it is not registered as such with the U.S. Securities & Exchange Commission or any other state or federal authority under the Investment Advisers Act of 1940 or any other law. The investments and strategies discussed in Everything Money’s YouTube videos and on Everythingmoney.com are not and should not be considered investment advice and may not be suitable for you. They do not take into account your particular investment objectives, financial situation, needs, or personal circumstances and are not intended to be specific to you. Before acting on any investment or strategy discussed, you should always do your own research and make your own independent decision about whether it is suitable for your particular circumstances. You should also consider seeking advice from your own legal, financial, tax, accounting, or investment advisers. Everything Money does not provide such advice.