Growth beats cheap

In 2016 Nvidia looked expensive and Intel looked cheap. Here is $1 in each, ten years on

115xNvidia, ten years on

Nvidia $115Intel $1.89

$1 put into each at the end of October 2016, share prices only. Source: Nasdaq

Why it matters

A cheap stock that stops growing never gets cheap enough, while growth that lasts can carry a high price. That is why we follow Peter Lynch: growth is what really keeps risk low.

Try it yourself

Earnings growth a year25%Price you pay (P/E)40

The growth company$1 becomes$4.6616.6% a year Growing, but short of 10x

The cheap stockP/E 10, no growth · $1 becomes$1.000.0% a year Going nowhere

Ten years. Assumes the growth company's P/E settles at 20 as it matures, and the cheap stock stays at 10. Dividends not counted.

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