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Nvidia (NASDAQ: NVDA) has been notorious for being a high-growth, highly valued stock since its run began in early 2023. However, that's no longer the case using this one common and important evaluation metric. Now, it's nearly the same price as the S&P 500 (SNPINDEX: ^GSPC), which is an odd thing to say considering how much growth Nvidia is expected to put up over the next few years.
However, this metric has one important consideration, and it could be giving investors false hope.
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The forward price-to-earnings metric is useful if you understand its nuances
The valuation metric that I most like to use -- and the one that's relevant in this discussion -- is the forward price-to-earnings (P/E) ratio. By definition, forward earnings haven't been achieved yet; they're just projections. As a result, they are inherently flawed because these predictions rarely come true. Furthermore, because the forward P/E ratio uses multiple analyst projections to come up with an average value, not every one of them can be right. But the average of all of them gives investors an idea of where the company's earnings could be heading, which is important considering how the market works.
The market isn't a rearward-looking entity. If it were, then tariff concerns wouldn't affect the stock market because it would only be looking at the past when tariffs weren't an issue. This is why the trailing P/E ratio is somewhat irrelevant (in my opinion) because it looks at where the stock has been, not where it's going. Still, the trailing P/E ratio can be a useful metric in conjunction with the forward P/E, as investors need to make sure earnings aren't going to fall off a cliff in future quarters.
The forward P/E ratio is especially useful for high-growth companies like Nvidia, as valuing it on trailing earnings when monster growth is expected in the next few quarters isn't a wise move. From this standpoint, Nvidia has nearly reached the same level as the S&P 500.
NVDA PE Ratio (Forward) data by YCharts
At 22.4 times forward earnings, Nvidia is only slightly more expensive than the S&P 500's 19.8 times forward earnings valuation. This is despite the fact that Wall Street analysts project 54% revenue growth in FY 2026 (ending January 2026) and 23% growth in FY 2027.
However, this price could be artificially low, as analysts might be waiting for Nvidia to report first quarter earnings before adjusting their projections. There are plenty of fears surrounding Nvidia, especially with tariffs looming. But is this enough to avoid the stock?