The roaring rally in Nvidia Corp’s stock has taken its market capitalisation close to $2 trillion. Yet, the stock is trading at about 33 times its one-year forward earnings. Which is less than half the valuation seen at its peak in June 2009. The highest valuation for the stock was 70x.
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In contrast, as many as 13 members from the benchmark Nifty50 index command a valuation, that is higher than that of Nvidia. The combined market capitalisation of these 13 companies stood at ₹35.3 lakh crore, or $426 billion. Interestingly, Nvidia added about $277 billion on Thursday alone, which is more than the market cap of the country’s largest firm, Reliance Industries (RIL).
Among the Nifty50 companies, Tata-owned Titan tops with a 12-month forward price-to-earnings (PE) ratio of 73 times. That was followed by Nestle India (71x), HDFC Life Insurance (68x), Apollo Hospitals Enterprise (66x), SBI Life Insurance (66x), and among others. The list is largely dominated by consumption stocks.
Titan reported lower-than-expected earnings for the quarter ended December 2023 due to weakness in the jewellery segment. The company reported a net profit of ₹1040 crore in Q3FY24, against Bloomberg consensus estimates of ₹1149 crore.
On the other hand, the chipmaker—dubbed “the most important stock on planet earth,” by a Goldman Sachs analyst—reported revenues of $22.1 billion in Q4FY24, compared to Bloomberg consensus estimates of $20.4 billion.
Remember, Nvidia enjoys the third-highest weightage in the S&P 500, behind only Microsoft Corp. and Apple Inc.
However, with a one-year forward PE of 29.1 times, the NASDAQ Composite remains the most expensive index in the world. MSCI India comes in second with a forward PE of 22.3x, whereas the Japanese Nikkei 225 commands a valuation of 22.2x, Bloomberg data show.
The P/E ratio, is a valuation metric comparing the price of a company’s stock to its earnings. The ratio is calculated by dividing a company's share price by its earnings per share (EPS). The higher the ratio, the more expensive a stock is relative to its earnings, or vice versa.
(Edited by : Ajay Vaishnav)
First Published: Feb 23, 2024 7:19 PM IST
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