Is NVIDIA Corporation (NVDA) a Good Stock to Buy?

We can also compare Nvidia to Dell Inc. (NASDAQ:DELL) and Hewlett-Packard Company (NYSE:HPQ), who are similarly hurt by weak PC sales. EV/EBITDA multiples at these companies are in the 4-5 range, so on that basis they are at least as cheap as NVIDIA Corporation (NASDAQ:NVDA). Dell Inc. (NASDAQ:DELL) is currently a battleground between founder Michael Dell, billionaire activist Carl Icahn, and private equity fund Blackstone; at current levels the stock does not have much upside to Dell Inc. (NASDAQ:DELL)’s or Blackstone’s offer but in theory Icahn’s own offer could encourage them to increase their bids. However, we aren’t sure it’s wise to speculate on M&A even with three separate offers likely reducing the downside. Hewlett-Packard Company (NYSE:HPQ) recorded a 16% decline in net income in its most recent quarter compared to the same period in the previous fiscal year, with sales down 6%, but the forward P/E is only 6. So we think that if the company can limit the fall in its earnings- it can see earnings per share decline, just at a slower rate- it will look like a good value prospect.

In fact, HP might be the most intriguing of these companies simply due to how cheap it is (though it might be best to wait for more results). While NVIDIA Corporation (NASDAQ:NVDA)’s large cash position prevents us from suggesting a short, the valuation multiples look high considering the general state of the industry, not particularly encouraging earnings numbers, and pessimistic sell-side forecasts.

Disclosure: I own no shares of any stocks mentioned in this article.