Tomorrow's Biggest Stock Movers Today: Why Traditional Value Metrics Miss the Next Nvidia

The Paradox Nobody Talks About

When Nvidia stock climbed nearly 3,000% over five years, it did something that contradicted everything traditional value investors preach: it soared while carrying an above-average valuation. In 2019, the company’s price-to-earnings ratio stood at 35, well above the S&P 500 average of 25. By conventional wisdom, this should have made Nvidia expensive, risky, and off-limits for bargain hunters. Yet this single stock became the decade’s defining success story.

The disconnect reveals a fundamental flaw in how most investors think about value. Warren Buffett once noted that the term “value investing” is redundant—the goal of all investing is to find value. But the irony is that many self-proclaimed value investors look in the wrong places.

The Numbers That Don’t Tell the Whole Story

Let’s break down the traditional value investing formula. Imagine two $50 billion companies. One generates $50 million in annual net income (P/E of 1,000). The other produces $5 billion (P/E of 10). The second company appears 100 times “cheaper.” This is how most investors score stocks—by running backward-looking metrics against historical earnings.

In 2019, Nvidia carried a market cap of roughly $100 billion with an annual P/E of 35. Here’s where the calculation stopped for conservative investors: They saw an expensive stock and moved on. What they couldn’t calculate was this: that same $100 billion valuation would eventually represent the company’s earnings from a single year.

Over the past 12 months, Nvidia generated $100 billion in net income. The company’s P/E looked inflated in 2019, but only because the financial results hadn’t caught up to what was coming.

The Missing Ingredient: Forward-Looking Vision

This brings us to another Buffett principle: “Growth is always a component in the calculation of value.” The critical word here is always—not sometimes, not usually, but always.

The flaw in traditional value investing isn’t the metrics themselves; it’s that they’re rearview mirrors. They measure what a company earned yesterday, not what it can earn tomorrow. Nvidia’s P/E ratio didn’t account for:

• The explosive scaling of AI infrastructure investment
• The durability of demand beyond typical semiconductor cycles
• The company’s pricing power in an irreplaceable market position

An investor with foresight in 2019 could have recognized that Nvidia was actually undervalued relative to its earnings trajectory, not overvalued based on its current P/E.

The Hard Part: Seeing What Others Don’t

To find the next biggest stock mover, investors must do something far more difficult than comparing P/E ratios: accurately predict business fundamentals years into the future. This is where most investors—even sophisticated ones—stumble.

The challenge isn’t identifying which companies are growing. It’s determining which growth stories are real, sustainable, and priced appropriately. Consider how many companies appeared to have revolutionary potential but faced margin compression, demand destruction, or competitive disruption. Nvidia defied these risks, but predicting that outcome required seeing through genuine uncertainty.

The takeaway isn’t that value metrics are useless. Rather, they must work alongside forward-looking analysis. The best stocks for the next decade might look expensive today using traditional valuation frameworks. But a decade from now, they’ll appear as screaming bargains in hindsight.

What This Means for Your Portfolio

Finding tomorrow’s biggest stock movers requires balancing two opposing forces: the discipline of measured valuation analysis and the flexibility to recognize transformational business trajectories. Historical P/E ratios matter, but they tell you almost nothing about which companies will drive exceptional returns.

The stocks that outperform tomorrow won’t necessarily trade at single-digit P/E multiples today. Some may look expensive by conventional standards. The question isn’t whether a stock appears cheap in the moment—it’s whether you can genuinely understand where the business is headed and whether the current price reflects realistic expectations of that future.