1 Reason Nvidia Stock Could Have a Big March
Key Points
The chipmaker continues to grow at an unbelievable pace.
Even so, it is far cheaper than some other popular stocks.
- 10 stocks we like better than Nvidia ›
Nvidia (NASDAQ: NVDA) has been one of the best stocks to own over the last few years, but it has been fairly dormant over the past few months. Since October, Nvidia's stock hasn't really done a whole lot, especially since investors are used to massive returns from the world's largest company.
However, after it reported an incredible fourth quarter and gave strong guidance for this year, I believe that Nvidia will have a huge March, and there's one reason why it's going to happen.
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Image source: Getty Images.
Nvidia is undervalued for its growth
Investors often debate whether a stock is overvalued or undervalued. However, when it comes to Nvidia, the conversation normally centers on why it's overvalued. I think that's nonsense, because when you integrate its growth, the stock actually looks cheap.
During its fiscal 2026, ended Jan. 25, Nvidia delivered earnings per share (EPS) of $4.93. That's an impressive figure for Nvidia's price tag, but it doesn't paint the full picture.
Back in April 2025, President Donald Trump barred Nvidia and its peers from selling their computing units to China. This caused Nvidia to take a massive write-down, which negatively impacted earnings. However, Nvidia may be getting the green light to export to China soon, although Nvidia hasn't yet included any Chinese revenue in its Q1 outlook.
At Nvidia's current $195 price tag, $4.93 in earnings would price the stock at nearly 40 times trailing earnings. However, using a backward-looking approach is the wrong way to assess Nvidia, as it's growing so quickly. In Q4, Nvidia posted 73% revenue growth, making whatever happened in the past 12 months nearly irrelevant to what's going to happen in the next 12.
A far better way of valuing Nvidia's stock is using forward earnings. If you do this, Nvidia's stock actually looks reasonable.
NVDA PE Ratio (Forward) data by YCharts
Indeed, 25 times forward earnings is a great price to pay for Nvidia stock, especially if the AI buildout lasts beyond 2026, which it's expected to do. And 25 times forward earnings is less than several other stocks that may be more associated with value-oriented investing, like Coca-Cola (24.9 times forward earnings), Apple (32.3 times forward earnings), or Costco Wholesale (48.9 times forward earnings).
Like it or not, the AI buildout is ongoing, and Nvidia is a huge part of it. I think Nvidia could have a huge March due to its fairly cheap valuation, and it should be primed to rocket higher throughout the month.
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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Costco Wholesale. The Motley Fool has a disclosure policy.
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