For investors looking to balance the search for high-growth companies with some caution, the Growth At a Reasonable Price (GARP) or "affordable growth" strategy offers a notable middle path. This method tries to find companies showing strong and lasting growth paths, but whose share prices do not completely account for that possibility, presenting a more appealing starting point than expensive, highly valued counterparts. A vital part of this strategy is confirming that solid growth is backed by good core business basics, including earnings and financial strength, to reduce risk. One stock that recently appeared through such a filtering process is NVIDIA CORP (NASDAQ:NVDA).
A Close Look at NVIDIA's Fundamental Report
A check of NVIDIA's detailed fundamental analysis report shows a profile that matches well with the affordable growth idea. The company receives an overall fundamental score of 9 out of 10, a number calculated from five key parts: Growth, Valuation, Health, Profitability, and Dividend. It is the relationship between these scores, especially the high growth score next to a fair valuation, that makes NVIDIA a notable pick.
Outstanding Growth Path
NVIDIA's growth story is its most noticeable trait, receiving a top score of 9. The company is not just expanding; it is speeding up at a remarkable rate, driven by leading roles in artificial intelligence (AI), data center computing, and gaming.
- Past Results: Over the last year, revenue jumped by 65.22%, while Earnings Per Share (EPS) grew by 60.43%. The multi-year averages are even more surprising, with yearly revenue growth averaging 64.24% and EPS growth at 83.26%.
- Future Predictions: While experts expect a slowdown from these very high levels, the forward view stays very positive. EPS is predicted to grow almost 33% each year, with revenue forecast to rise over 30% per year. This continued high growth is a central part of the GARP strategy, as it supplies the basic engine for future investor gains.
Valuation Considered
With a Valuation score of 6, NVIDIA shows the detailed picture important to the affordable growth filter. On a simple basis, common measures point to a high price.
- The stock sells at a Price/Earnings (P/E) ratio of 44.34, which is high next to the wider S&P 500 average.
- However, the GARP strategy focuses on setting. Compared to its own high-growth field of Semiconductors & Semiconductor Equipment, NVIDIA's valuation seems more acceptable. Its P/E ratio is lower than nearly 70% of its industry group.
- More future-oriented and growth-weighted measures give a better account. The Price/Forward Earnings ratio of 23.75 matches the S&P 500 average and is lower than almost 79% of industry rivals. Importantly, the low PEG ratio—which includes earnings growth—suggests the current price could be a fair payment for the outstanding growth being delivered.
Supported by Strong Profitability and Financial Health
Affordable growth investing needs that growth be of good quality, not driven by too much risk or bad management. NVIDIA does very well here, having a perfect Profitability score of 10 and a good Financial Health score of 9.
- Profitability Leader: The company's margins are the best in its field. Its Operating Margin of 59.12% and Return on Invested Capital (ROIC) of 71.56% do better than almost all peers. These numbers show a very effective business system able to turn revenue into large earnings.
- Strong Balance Sheet: Financially, NVIDIA is in a good state. It has very little debt, with a Debt/Equity ratio of 0.06, and keeps important cash availability, with Current and Quick Ratios well above 3.0. An Altman-Z score firmly in the "safe" area further confirms its stability. This financial strength gives security and the option to put money into future new ideas without difficulty.
Summary and Additional Study
NVIDIA CORP shows the kind of company an affordable growth filter aims to find: one with very fast, yet still positive future growth, selling at a valuation that is sensible inside its high-growth industry, and built on a base of excellent profitability and financial soundness. The mix indicates a business whose share price is held up by real, good-quality earnings strength instead of uncertain excitement.
For investors wanting to find other companies that match this careful growth-at-a-reasonable-price model, more outcomes can be seen by checking the Affordable Growth stock screen.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer or request to buy or sell any securities. The information shown should not be the only reason for any investment choice. Investors should do their own separate study and talk with a qualified financial advisor before making any investment decisions. Past results are not a guide to future outcomes.
