We’ve seen a flea favorite get wrecked, like Nvidia (NASDAQ:NVDA) was unable to fight off the selling pressure in the stock market. As Nvidia reached new heights in November 2021, the sale eventually hit that name as well. At its recent low, NVDA stock was down 55% from the highs.

Does that make it a truck save situation? As much as I’ve been an advocate for such situations in the past – like Nvidia being “a steal” below $50 – this environment is different. When Nvidia was stealing, we had an instinctive panic reaction to Covid-19.

In this environment, we have a hawkish Federal Reserve, persistently high inflation, supply chain issues, and geopolitical issues, among others. Simply put, we are in a difficult environment and this time the Fed is not supporting us. Does that mean Nvidia stock is a sell? No. It just means that I don’t consider this an aggressive all-in situation. Not to mention that NVDA stock is still up about 300% from the “stealing” levels highlighted two years ago.

Teleprinter Company Current price
NVDA Nvidia $162.35

Accumulate NVDA Actions

Instead of going all-in on the stock at current levels, I like the idea of ​​accumulating NVDA shares. It’s not a plan I came up with today, it’s something I’ve been looking at for weeks now.

Also known as Cost Average (DCA), this can be a very effective method for investors. This is especially true when it comes to high-quality companies, like Nvidia. Accumulating stock or using DCA allows us to average a position. It removes the stress and potential pain of stacking in stock at a specific level.

Since 1950, the S&P500 delivered a win rate north of 82% when we include dividends and its positive years exceed negative years. In short, it favors long-term investors who DCA their funds. That’s no guarantee that Nvidia will do well, but its business is solid and it should ensure that its long-term performance will pay off for patient buyers.

Nvidia’s business is robust

The world feels like it’s going to hell in a hand basket, doesn’t it? This attitude is reflected in the stock market, which has had one of its worst start to the year in many decades. For Nvidia though, the company is doing pretty well.

Analysts expect revenue growth of 26% this year, with estimates calling for double-digit revenue growth in each of the next four years. And remember, analysts have been embarrassingly conservative in their estimates over the past few years. This applies to Advanced micro-systems (NASDAQ:AMD) as well.

As for earnings, estimates call for growth of 22% this year and 19% next year. But it’s weird, isn’t it?

How many high-quality companies are increasing their revenue and profits by more than 20% this year? Not by much and yet NVDA stock saw a peak to trough decline beyond 50%. It has been halved, but the estimates have hardly changed.

This company is still doing very well, regardless of what the stock is doing. That’s because Nvidia responds to long-term, age-old industry trends. These trends include things like cloud computing, supercomputing, data centers, artificial intelligence and machine learning, gaming, graphics, drones, robotics, metaverse, autonomous driving, and more.

Of course, some of these end markets may experience a short-term drop in spending, but generally speaking, investment will continue. Just because the economy is slowing doesn’t mean less data is being created. That doesn’t mean people want slower or less capable technology.

Profitability justifies the evaluation

Because the stock has been halved, NVDA stock is now trading at a more reasonable rate of 33 times this year’s earnings. For some investors, this valuation may seem too high, but how much are we paying for a leading company with double-digit earnings and revenue growth?

The company has significant margins because it combines hardware and software in its offerings. Specifically, it generates a gross profit margin of 65% and a net profit margin of 32%. Do you realize how much that compares to technology?

Put it this way: Nvidia generates higher net margins than any FAANG stock.

At its low, NVDA stock is trading at 29 times earnings. Is it a low enough price? Do we need 25 times earnings (about $140 per share)? Is it lower than that?

Valuations are not an exact science. If they were, there would be no need to dissect the market. It would be a single solvable mathematical equation. This is clearly not how it works, which is why I like the DCA method with quality companies.

Low Risk Trading in Nvidia Stocks

For those wanting a low-risk setup in NVDA stocks, keep an eye out for $180. Since the stock broke above the downtrend resistance (blue line) and recovered the 10- and 21-day moving averages, it has held above $180.

Bulls can be long against this level. More aggressive longs can use the $175 level instead. If it loses the latter, it also loses its short-term moving averages.

Below $175 and NVDA shares can retest the lows of $160, where they previously hammered a nice bottom. For DCA investors, they don’t have to worry about levels so much.

As of the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.