Think Nvidia Stock Is Expensive? This Chart Might Change Your Mind.

Now, some investors ly feel they've missed out because s trade at what would be considered a relatively high price-to-earnings (P/E) ratio

However, there's an argument to be made that Nvidia is still an inexpensive stock

Here's a look at both sides of the discussion, including one chart that really tells the story that investors should focus on

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Is Nvidia stock expensive, or is it a bargain

Even with the stock's resounding three-year gain, its valuation has decreased when looking at price-to-free cash flow (P/FCF) and P/E ratios

That makes sense with sales exploding thanks to unprecedented demand for its GPU chips and other ducts supporting artificial intelligence (AI) infrastructure

Both of those financial metrics hit one-year lows as recently as early April

The stock has surged higher since then, but both P/FCF and trailing P/E remain below their respective averages over the past 12 months

A P/E of almost 50 based on last year's earnings still may seem excessively high to some, but investors need to look forward, not back

An estimated forward P/E of 35 is much more reasonable for a growth stock Nvidia

And growth is what is driving the story

Global data center construction is driving unprecedented demand for Nvidia ducts

Clusters of servers containing its GPUs, networking ducts, and AI architecture power these centers

That's led to rocketing sales in Nvidia's data center segment

A visual display of that growth is what should give investors confidence to buy the stock at recent levels

Nvidia's data center sales continue to increase to record levels every quarterly period

The company plans to release next-generation chips on an annual cadence as well

That should keep sales thriving and the stock moving higher as a result

Howard Smith has positions in Nvidia

The Motley Fool has positions in and recommends Nvidia

The Motley Fool has a disclosure policy.