The odds are against high-flying Nvidia via ITYourMoney
Of 231 companies that reached similar valuation multiples over last 50 years, over 90% underperform over following three, five- and 10-year periodsNvidia may deliver for shareholders but history suggests the odds are stacked against it. Photograph: Christie Hemm Klok/The New York TimesApple shares may look a bit pricey, but not compared to the latest trillion-dollar stock, high-flying Nvidia. It trades on 25 times expected sales – more than any other S&P 500 stock.
Can Nvidia justify the hype? Probably not, suggests WisdomTree’s Jeremy Schwartz. He notes 231 companies reached similar valuation multiples to Nvidia over the past 50 years. Only 20 per cent beat the market over the next year, with the median stock underperforming by 36 per cent. Over 90 per cent underperform over three, five- and 10-year periods.
That said, the fact Nvidia is the most expensive US stock means momentum may carry it higher. Schwartz looked at 99 companies with the highest price-sales ratios over the last six decades. In such cases, the median stock slightly outperformed the S&P 500 over the next year.
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