By Philip van Doorn

Nvidia's stock has gotten cheaper even as the company has sustained robust levels of growth

Nvidia just announced a huge increase to its buyback authorization.

Nvidia has made another big splash, with its board of directors authorizing another $150 billion in stock buybacks. That sets up the company to repurchase a whopping $235 billion worth of shares between now and January 2028.

With a buyback program this large, Nvidia's management is sending a message that it views the stock as undervalued. And the data supports that shares are in bargain territory, even though the company is the largest on earth, with a market capitalization of $5.42 trillion.

Let's begin with a comparison of Nvidia's (NVDA) forward price/earnings valuation. The stock closed at $225.07 on Friday, meaning that it was trading at 16.6 times the average estimate for its earnings per share, based on data from FactSet.

Through Friday's close, Nvidia's stock had risen 21% over the course of the year. But it actually got cheaper in the process, as the rolling consensus 12-month EPS estimate increased by 83%. Nvidia's forward P/E is down from 25.3 at the end of 2025.

Now let's compare that forward P/E with those of the S&P 500 SPX and the index's information-technology sector, along with estimated sales and EPS growth rates for calendar 2026 and projected compound annual growth rates from 2026 through 2028. Estimates are adjusted by FactSet to account for companies like Nvidia whose fiscal reporting periods don't match the traditional calendar.

There are many attractive numbers here, including solid growth projections across the board.

Nvidia really stands out with sales and EPS expected to increase at annualized paces above 50% through 2028. And for both 2026 and across the two-year period, EPS is expected to increase more quickly than sales.

Brandon Nelson, the manager of the Calamos Timpani Small Cap Growth Fund CTSIX, doesn't hold shares of Nvidia because he is focused on small companies. But when asked about Nvidia's declining P/E, told MarketWatch that "you have seen multiples come down across the AI food chain."

"We'll see how earnings season goes. People need to be reminded that the earnings will be strong. That might cause valuation multiples to expand again," he said.

Share buybacks can lower a company's diluted share count and raise its earnings per share. That can add to Nvidia's EPS growth rate and support higher share prices over time, even if the stock's forward P/E remains relatively low.

Another Deep Dive: Tax-free bond yields are in a sweet spot. Get in before it's too late.

-Philip van Doorn

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09-28-26 1229ET