Key Points
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The forward P/E ratio rewards highly profitable companies with above-average growth rates.
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Nvidia’s valuation assumes its growth is unsustainable, but it has plenty of opportunity ahead.
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Meta Platforms is priced like a value stock, but it’s making good use of AI to up its performance.
- 10 stocks we like better than Nvidia ›
Nvidia (NASDAQ: NVDA), Alphabet, Apple, Microsoft, Amazon, Meta Platforms (NASDAQ: META), and Tesla — collectively known as the “Magnificent Seven” — have produced monster gains for long-term investors. But all seven stocks have lost value so far in 2026 — and that should merit some attention from investors on the lookout for opportunities.
Nvidia and Meta Platforms — in particular — are compelling valued based on a key metric. Here’s why both growth stocks are selling off, and some context to help you decide which one could be the better buy for you in March.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
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Why forward P/E matters
The price-to-earnings (P/E) ratio is one of the most popular metrics for evaluating stocks. And for good reason, as it’s simply the price of the stock divided by earnings per share.
Companies with clear ways to deploy capital effectively deserve premium valuations. A company like Coca-Cola can expand into new markets and acquire or develop new beverage lines. But it doesn’t have nearly as many levers to pull to accelerate earnings growth compared to a company like Amazon — which plays in so many different end markets.
The forward P/E ratio rewards companies by dividing the stock price by analyst consensus earnings estimates for the next year. For example, Nvidia has a 37.2 P/E compared to 29.6 for the S&P 500, but just a 22.1 forward P/E compared to 23.6 for the S&P 500. Similarly, Meta Platforms is also slightly cheaper than the S&P 500 based on forward earnings.
S&P 500 P/E Ratio Forward Estimate data by YCharts
Granted, forward P/E can inflate a stock’s value if a company misses on earnings. And investors who are buying stocks and planning to hold them over the long term likely care more about a company’s earnings over several years, if not decades, rather than what they are today.
A top AI infrastructure play
Nvidia is by far the best Magnificent Seven stock for investors who believe the company can sustain earnings growth even close to its current rate. For its fiscal 2026 — which was the 12 months ended Jan. 25, 2026 — the company grew revenue by 65% and diluted earnings per share by 59.5%. Nvidia’s valuation is still reasonable,