The most recent earnings release NVIDIA Corporation’s (NASDAQ:NVDA) announced in January 2018 showed that the company gained from a strong tailwind, leading to a high double-digit earnings growth of 82.89%. Below is my commentary, albeit very simple and high-level, on how market analysts predict NVIDIA’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. View our latest analysis for NVIDIA
Analysts’ expectations for the coming year seems optimistic, with earnings climbing by a robust 27.52%. This growth seems to continue into the following year with rates arriving at double digit 47.07% compared to today’s earnings, and finally hitting US$5.27B by 2021.
Although it is useful to understand the growth rate year by year relative to today’s level, it may be more valuable to estimate the rate at which the earnings are rising or falling on average every year. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of NVIDIA’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 17.33%. This means, we can assume NVIDIA will grow its earnings by 17.33% every year for the next couple of years.
For NVIDIA, I’ve compiled three important aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is NVDA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether NVDA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NVDA? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.