Nvidia is right: Its stock is a bargain by this measure

Nvidia's stock has become less expensive on a valuation basis even as the company has continued to deliver strong growth, according to a recent analysis. This combination—rising earnings alongside a share price that has not kept pace proportionally—has pushed metrics such as the forward price-to-earnings ratio lower, prompting the observation that the shares look like a relative bargain by that measure.

The dynamic reflects a simple arithmetic relationship: when earnings estimates climb faster than the share price, the multiple compresses. For investors, that matters because valuation multiples are one of the few objective anchors in a market often driven by sentiment. A falling multiple can mean either that expectations are moderating or that the stock has simply lagged its own fundamentals.

What to watch is whether that growth proves durable. If earnings estimates hold and the multiple stays compressed, the valuation case strengthens. If growth slows, the same multiple can quickly look less attractive. The key takeaway is that "cheap" is always relative—here, it depends on whether Nvidia's growth trajectory continues to justify the comparison.