This Just In: Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the worst ... and best ...
Motley Fool Stock Advisor recommendation NVIDIA (Nasdaq: NVDA) is receiving mixed blessings from Wall Street this week -- but perhaps not in the way you're thinking. Both analysts who've chimed in recently, Wedbush Morgan and AmTech Research, like the stock. Wedbush upgraded it to buy yesterday; AmTech reiterated its own buy rating this morning. Problem is, we're talking about two very different analysts here.

AmTech sports an entirely respectable record on CAPS, with 53% accuracy on its picks, and a CAPS rating of 87.12. But Wedbush is another matter entirely. That one gets just 43% of its picks right, underperforms the market by about 4 points per pick on average, and racks up a negative CAPS score that puts it in the bottom 20% of investors.

Let's go to the tape
Let's see what got Wedbush in this fix. Good news first: Wedbush is not entirely incompetent at picking semis. It's gotten a whole handful of these picks right in the past.

But on the other hand ...

Basically, this analyst looks pretty hit-or-miss when it picks chips. So do NVIDIA shareholders have any reason to be pleased by Wedbush's newfound bullishness on their stock? I think they do.

Foolish takeaway
Not for any reason tied to Wedbush, mind you, but for two reasons even better. First up, AmTech. This better-than-Wedbush analyst thinks its fellow travelers are slightly too optimistic about what NVIDIA will accomplish this year. Yet AmTech stands behind the stock. It argues that based on historical multiples that have ranged from 17 to 27 times forward earnings, the stock looks cheap at today's forward price-to-earnings ratio of about 15.

Whatever you think about the reliability of forward earnings (I don't put much stock in it), based on its actual trailing earnings, NVIDIA looks cheap. Moreover, by my calculations, the price-to-free cash flow ratio on this company comes to a little more than 11. (Yes, Spinal Tap fans: This stock goes to 11.) Against analyst earnings growth projections verging on 17%, that looks cheap, Fools.

Do the friendly Fools at Motley Fool Stock Advisor still agree that NVIDIA's one worth owning? Take a free trial and find out.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's ranked No. 655 out of more than 100,000 players. Silicon Laboratories and NVIDIA are Motley Fool Stock Advisor recommendations. The Fool has a disclosure policy.