Nvidia stock slipped again Wednesday, with a valuation lower than the benchmark S&P 500 index.
The chip maker isn't immune to the semiconductor sector's woes, but its impressive cash returns mean it could eventually find a floor as a value stock.
Nvidia shares fell 3.7% to $200.42 on Wednesday. The stock is down about 6% over the past month, even though Nvidia posted a strong earnings report in May and showed off new hardware at the Computex conference in Taiwan last week.
Barron's argued in our recent stock pick that Nvidia was a bargain at around $226 and a forward price-to-earnings ratio of around 26 times. It now trades at a forward multiple of 19.7 times, compared with 20.4 times for the benchmark S&P 500, according to FactSet.
"We added [Nvidia] to our value portfolio following the significant dividend increase and its period of underperformance," said Nancy Tengler, CEO of Laffer Tengler Investments. "At roughly 20 times next year's earnings and 23 times 2027 earnings, with expected earnings growth of 87%, we'd much rather be invested there than in a consumer staples company, for example."
Value stocks typically trade at lower-than-average price-to-earnings ratios and return significant cash to shareholders.
Nvidia plans to return 50% of free cash flow to shareholders through dividends and buybacks. For 2026, Nvidia is expected to generate about $194 billion in free cash flow, so it should be handing back more than $97 billion.
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