Being able to retire rich, or at least comfortable, is the goal of almost any investor. However, it's much easier said than done. In a recent Wells Fargo survey, respondents between the ages of 50-59 said that they had, on average, about $29,000 saved up. With pensions all but gone, and Social Security targeted for cuts in the future, it's hard to count on anyone but yourself. But $29,000 isn't going to cut it for most people, so you've got to get involved in the stock market in order to grow that nest egg. Getting in the game is the easy part; choosing the right stocks is the hard part.

Making prudent decisions
Generally speaking, I look for four traits in a retirement stock:

  1. Valuation: Investors of all ages want to make sure they're not overpaying for a stock, but this matters even more in retirement. Retirees don't have the long time horizon that younger investors have, so it's essential to make sure you don't overpay in the short term.
  2. Dividends: Most retirees need a combination of both growth and income, as they'll be depending more and more on their portfolio to help with everyday expenses. Companies that pay dividends not only offer immediate income, but they've also proven to outperform non-paying dividend companies over long periods of time.
  3. Growth: Investors love dividends, but everyone wants to see their stocks rise over time. Growth can be as big a part of your portfolio as a steady dividend. It's important to note that you don't need a high-flying stock that's going to shoot to the moon; a company that can grow and outperform the market is hard enough to find, so steady growth is highly covetable.
  4. Low volatility: Retirees want to invest in great growth stocks just as much as anyone else, but they also want to be able to rest well knowing that their portfolio won't be taking them on a rollercoaster ride. At the end of the day, most retirees would rather own a sturdy company that lets them sleep at night than a company that whips up and down with the gyrations of the market.

So how does NVIDIA stack up?
In order to check out the valuation of NVIDIA (Nasdaq: NVDA), we don't want to look at only its P/E ratio of 54.4. That may seem expensive, but really we don't know without looking at the ratio in historical context. Over the last five years, NVIDIA's average P/E ratio has been 26.6, which is less than the current ratio. This suggests that investors may be paying more than they've had to in the past, so it's important to find out why the price tag might be a bit higher today.

NVIDIA doesn't pay a dividend. Although this is unfortunate, it doesn't mean the company isn't doing great things with its capital or that it won't pay a dividend in the future.

Next, we want to ensure that NVIDIA's stock has the ability to rise over the next five, 10, or 20 years. A company that's growing its net income has the best possible chance to see its share price rise over time. Of course, we can't predict the future, but we can look back to get an idea of how the company has performed in the past in order to try to ensure future earnings growth. Over the past five years, NVIDIA has shrunk its net income at an annual rate of -3.4%. Unfortunately, NVIDIA has run into its own share of problems, and the financial collapse of 2008 certainly couldn't have helped either. So the company has been unable to grow earnings, which doesn't exactly mean that it won't in the future, but it's certainly not the greatest of signs.

One of the best measures of volatility is called beta. Beta measures the impact that the movement of the stock market will have on a particular stock. For instance, a beta of 1.0 signifies that NVIDIA will move in tandem with the market; a beta of 2.0 means that the stock will move up twice as much as the general market, and vice versa. In this particular case, NVIDIA has a beta of 1.17, which is pretty low. Generally speaking, I like to see a beta below 1.2 for retirees. In this case, NVIDIA fits the bill.

Let's look at the competition
We've taken a look at NVIDIA, and maybe you think it's passed all the tests, or maybe you just don't feel comfortable with the results. Either way, it's beneficial to see how a company stacks up in its industry, because it's just as important to understand a company's competitors as it to understand that particular company. Here are NVIDIA's stats when compared to three of its closest competitors:

Company

Current P/E

Dividend Yield

5-Year Net Income Growth

1-Year Beta

NVIDIA 54.4 0% (3.4%) 1.2
Advanced Micro Devices (NYSE: AMD) 14.0 0% 23.3% 1.6
Intel (Nasdaq: INTC) 10.6 3.3% 6.2% 0.9
Texas Instruments (NYSE: TXN) 13.8 1.4% 6.8% 0.9

Source: Capital IQ, a division of Standard & Poor's.

Each company has traits to like and traits left to be desired. Either way, it's beneficial to look at the industry picture and not just NVIDIA in isolation.

Of course, I can't decide for you whether or not this is the best stock for retirement, but it has passed just one of the four tests, which shows that this stock has some promise but also raises some concerns. Depending on which traits are most important for you, you'd be wise to look further into this stock for your portfolio.

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Jordan DiPietro owns no shares. NVIDIA is a Motley Fool Stock Advisor selection. The Fool owns shares of and has bought calls on Intel, which is a Motley Fool Inside Value choice. Motley Fool Options has recommended a diagonal call position on Intel. The Fool owns shares of Texas Instruments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.