Is NVIDIA Great or What?

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For every stock out there screaming, "buy me," others simply give us a nudge and a nod. While all the attention might be focused on their five-star peers, we can sift through Motley Fool CAPS to find four-star stocks giving us the "high sign" that they're approaching greatness. 

These opportunities -- including familiar names and beaten-down companies -- rank higher than most of the other 5,400 starred companies, and it pays to investigate their potential. This time out we'll take a look at graphics chip maker NVIDIA (NAS: NVDA) , a less obvious source for tomorrow's great buys.

NVIDIA Snapshot

Market Cap$8.4 billion
Revenues (TTM)$4.0 billion
1-Year Stock Return6.2%
Return on Investment(7.1%)
Dividend/YieldNA/NA
Recent Price$13.54
CAPS Rating (out of five)****

TTM = trailing 12 months.

Of course, just because the 180,000-member CAPS community has chosen this stock as one being on the road to greatness doesn't mean you should buy in. Due diligence is still required, but let's see why they think it might merit your attention.

In the sight of greatness
Like the derecho that left a 700-mile swath of destruction across the Midwest and Eastern Seaboard last month (and simultaneously introduced a hitherto unknown word into everyone's vocabulary), the dying PC market slammed into the semiconductor market and is leaving a similarly broad band of carnage.

Intel (NAS: INTC) cut its full-year revenue forecast last month from "high single digit growth" down to just 3% to 5% growth as Europe's double-dip recession and wavering economic prospects here at home further push sales of PCs down. Hard-disk drive maker Seagate Technologies followed that up yesterday with a disappointing outlook that analysts say confirms the PC market remains crippled. In between, the industry watchers at IDC confirmed the gloom: Second-quarter PC sales fell 0.1%, marking the seventh straight quarter of single-digit to nonexistent growth.

Not exactly the 10 commandments
Yet all is not lost because, as PC sales have fallen, tablets and mobile computing are on the rise, becoming the fastest-growing product category in the consumer electronics industry. The industry's trade association says sales should hit $29.1 billion this year, up 83% from 2011. In fact, tablet shipments are expected to surpass notebooks in just a few years.

That's why you shouldn't worry about NVIDIA. Although the bulk of its revenues still come from PC sales, which were down last quarter more from component shortages than from desktop sales, which actually rose, its Tegra mobile and chip business was still going strong. Sales were up 8% in the first quarter after having tripled in 2011.

It's true Apple (NAS: AAPL) will continue to dominate the tablet market for years to come and it refused to give NVIDIA a bite of the, um, apple, by staying with ARM Holdings' (NAS: ARMH) processor, but the graphics chip maker has an envious lineup of partners regardless. Google's popular Nexus 7 tablet carries the NVIDIA stamp, as does Microsoft's new Surface tablet that opened to rave reviews.

Yet it may be its positioning in mobile that sets it apart. Its Icera acquisition will allow NVIDIA to specialize in the mobile market where faster processors using less power will not only be needed, but sought after, too. It will more effectively compete against Qualcomm's (NAS: QCOM) dominating presence.

A blue light special
At 16 times earnings and 15 times estimates NVIDIA trades at lower values than most of its processing peers, which when compared to its projected growth rate sets it further apart. But with its enterprise value going for just nine times its free cash flow, I think NVIDIA is a bargain-basement stock that's not being fully appreciated by the market.

CAPS member azinsd agrees the mobile market is where it will be at for NVIDIA's future, noting it's an "Innovative chip maker who has made transition to mobile sooner and better than many people think."

With more than 5,500 other members weighing in, it's probably a good part of the reason 96% of them think it will outperform the broad market indexes. Let me know in the comments box below if you think it can dial up more growth, then head over to the NVIDIA CAPS page and weigh in on its prospects yourself.

A great opportunity for you
To get the full scoop on one of the greatest plays in all of tech, Apple, you can click here to grab the Fool's new premium research report on Apple, including 12 months of free updates. Grab your copy today.

The article Is NVIDIA Great or What? originally appeared on Fool.com.

Fool contributor Rich Duprey owns shares of Apple, Intel, and Seagate Technology, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Microsoft, Google, Qualcomm, Apple, and Intel. Motley Fool newsletter services have recommended buying shares of Intel, Microsoft, NVIDIA, Apple, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing puts on NVIDIA. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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