NVIDIA: Share price has soared and its EPS has grown even faster causing the P/E to contract.

Here is the table listing Revenue, PBT, Adjusted EPS, Adjusted Share Price, and the resulting P/E ratio for FY2020 to FY2025, all adjusted to a constant diluted share count of 24,804 million.

Key Insights from the P/E Ratio

The P/E ratio (Adjusted Share Price / Adjusted EPS) reveals the market's changing expectations over time:

1. The "Pre-Boom" High P/E (FY2020-FY2023):

   • For years, the stock traded at an extremely high P/E ratio, consistently around 95-100.

   • This indicates that the market was pricing in future growth potential long before the explosive revenue materialized. Investors were willing to pay a premium based on the company's positioning and technology, even during a temporary slump in earnings in FY2023.

2. The "Earnings Catch-Up" (FY2024-FY2025):

   • As the AI boom took hold, the company's earnings (Adj. EPS) began to skyrocket, growing much faster than the share price.

   • This caused the P/E ratio to contract significantly, falling from over 100 to ~53 by FY2025.

   • This is a classic sign of a high-growth company: the valuation multiple compresses as explosive earnings growth "catches up" to and justifies the high stock price. The company became substantially more profitable, making its stock valuation relatively less expensive despite the share price rising over 10x.

Conclusion: The narrative here is that the market correctly anticipated a major growth phase (high P/E), and when that growth spectacularly arrived, the massive increase in earnings made the valuation look more reasonable, even as the share price soared. The P/E ratio of ~53 at the end of FY2025 suggests the market still expects very strong future growth, but now backed by proven, enormous profitability.

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Summary and Key Insights

Interpretation:

1. Hyper-Growth Acceleration: The CAGRs for Revenue, PBT, and EPS are significantly higher in the 2-year and 1-year periods, confirming the acceleration of the business since FY2023.

2. Operating Leverage: PBT and EPS have grown much faster than Revenue in all periods, especially from FY23-FY25 (347% vs. 120%). This demonstrates immense operating leverage—as revenue grew, profitability exploded.

3. Valuation Multiple Compression: The P/E Ratio CAGR is negative in all periods. This is a critical finding: while the share price has soared, the company's earnings (EPS) have grown even faster, causing the valuation multiple to contract. The market is paying a lower multiple for each dollar of earnings today than it was in FY2021-2023, because those earnings are now so much larger.

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Summary and Key Insights using CAGR 

Interpretation:

1. Hyper-Growth Acceleration: The CAGRs for Revenue, PBT, and EPS are significantly higher in the 2-year and 1-year periods, confirming the acceleration of the business since FY2023.

2. Operating Leverage: PBT and EPS have grown much faster than Revenue in all periods, especially from FY23-FY25 (347% vs. 120%). This demonstrates immense operating leverage—as revenue grew, profitability exploded.

3. Valuation Multiple Compression: The P/E Ratio CAGR is negative in all periods. This is a critical finding: while the share price has soared, the company's earnings (EPS) have grown even faster, causing the valuation multiple to contract. The market is paying a lower multiple for each dollar of earnings today than it was in FY2021-2023, because those earnings are now so much larger.