While NVIDIA Corporation (NASDAQ:NVDA) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 24% in the last quarter. But that doesn’t undermine the rather lovely longer-term return, if you measure over the last three years. In fact, the share price is up a full 160% compared to three years ago. After a run like that some may not be surprised to see prices moderate. Only time will tell if there is still too much optimism currently reflected in the share price.
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
View our latest analysis for NVIDIA
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, NVIDIA achieved compound earnings per share growth of 40% per year. We don’t think it is entirely coincidental that the EPS growth is reasonably close to the 37% average annual increase in the share price. That suggests that the market sentiment around the company hasn’t changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how NVIDIA has grown profits over the years, but the future is more important for shareholders. This free interactive report on NVIDIA’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that NVIDIA shareholders are down 42% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 21%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Longer term investors wouldn’t be so upset, since they would have made 20%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like NVIDIA better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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