THIS 1 CHART COULD MAKE “AVERAGE JOES” MILLIONAIRES

Added: 2026-05-14

[00:00:00]There is a chart that has literally 99% correlation to where the actual share price goes in the long term. And that's what we're going to talk about in this video of understanding the chart, understanding what it tells us, and understanding how to deploy our portfolios to simply make freaking money, guys. Right? So, looking at the chart right here on Nvidia, clearly share price up and to the right in the last 5 years. Looking at the earnings per share growth in the last few years, clearly going up and to the right. When you look at this, it's perfectly correlated. Where the profits go is where the stock is likely to go. The stock does not dictate the profits. The profits dictate where the stock is actually going to go. So all we got to do is take a look at Nvidia and look at how much the actual earnings per share grew in the last year. Plot that on top of a stock chart and it's going to help us know when we should be more bullish and when we should be more bearish overall. Let's go take a look. So here is a one-year chart of the big bad Nvidia and let's see how much it went up in the last year. So, starting from right about here to right now, Nvidia share price went up 64%. It's right here, 64%. And again, going back to here, it's 64%. I can't make this stuff up, guys. Where the profits go is where the stock price is actually going to go.

[00:01:13]So, the name of the game is really just this. Find a good company like Nvidia, maybe at a good price, meaning a good P ratio with good profit growth. And if you find that, that is a recipe to make money. But if we look at this on like a a shorter duration basis, like here's a one-year chart. Sure, it bounces around all over the place. But you understand that if you have the elephant in the room of profits going up and to the right, the share price is eventually going to follow that, right? Like how many people were saying, "Oh my god, Nvidia is so perfectly rangebound." You go draw your origami lines on your chart and say, "Oh yeah, it's rangebound. It's going to stay rangebound, so you're going to go sell cover calls and go sell cashier puts." And then boom, the share price just gaps up all of a sudden. Why did that happen? It's because it was a coiled spring down here because earnings per share was sending to the moon on Nvidia. And when that happens, upside in the share price is very, very likely to happen. So again, if we look at this, we get it. The share price went up basically the exact same amount as the actual earnings per share growth. And if we go plot that line that I show on so many of my videos, they're basically going to start at the same point and end at the same point because they're perfectly correlated. We'll go through other examples in this video where they're not perfectly correlated because not all will be and that will be viewed as opportunity when they're not perfectly correlated, which there is some pretty big opportunities out there right now to be honest with you. So, just looking at this, if we all agree that the profits, this blue line dictates where the stocks are going to go, this is like gravity, this is like a magnet, this is just like a rubber band.

[00:02:43]And when you stretch the stock price above it, when you let it go ping, it wants to go back down. And when you stretch it below it, ping, it wants to go back up. So this is just the golden line as we could call it. So up here, do we want to have a crap ton of super bullish option strategies in our portfolio? Like a bunch of bought calls or a bunch of sold puts or a bunch of just leverage in your account? No, of course not. The share price was about 14% above the actual earnings per share growth line. Like sure the stock could have kept going up, but your odds are not super stacked in your favor right here versus down here. When the stock was what is this about 20 21% below the earnings per share growth line, it's more compelling to be bullish here versus bullish up here. But the problem of course is that retail investors, they get FOMO and they get panicky and they get nervous and they just freak out when share prices are going up and down. And if you think about what people were thinking up here, it's like Nvidia is going up. It's going to go to the moon.

[00:03:42]It's the next big thing. It's never going to stop. I want to go buy calls. I want to go sell puts. I want to leverage my portfolio out. And then bam, the share price goes down and it really does nothing from there for, you know, quite a few months. If we look at this from peak to trough, Nvidia stock fell over 20%. Doesn't mean it's a bad company. It just means that it was quite a bit of ways above the earnings per share growth line. But if I remove that, you could then see that oh my god, this big bad Iran thing happened and people were freaking out. The S&P 500 fell, the NASDAQ fell, sentiment was negative in the market. Everybody was panicking and freaking out and selling. So then that's Nvidia's no, you know, it's not excluded from that sentiment being negative. So people started selling down Nvidia stock. But what happened in the same time frame is that old steady Eddi earnings per share continued to go up and to the right. And when that was happening, when the stock was down here undervalued, it made sense to allocate, buy some shares, sell some puts, buy some calls, right? And again, think about the sentiment down here of people.

[00:04:40]They're scared. They want to go buy puts. So then we're going to turn around and go sell them puts for top dollar.

[00:04:46]And they don't want to buy calls down here. So we could go buy calls for bottom dollar. Then when a share price rebounds and sends to the moon, which it's really just at fair value right now in my opinion, people are like, "Oh my god, I want calls now." So we bought the calls for nothing. We could sell them for a lot up here. And we sold the puts for a lot, which is what we want when we sell puts. And then we could go buy them back for basically nothing up here. And of course, the share price went up, too.

[00:05:09]So that made those contracts more valuable for options at the end of the day. But understanding where the profits go gives you a good lay of the land of how to deploy your portfolio. So maybe up here you could go buy puts to hedge if you really wanted to. It really wasn't that expensive up here, but that's an option. You could go buy puts to go hedge. You could also go sell cover calls if you really really want, but you guys know I have videos on cover calls and why I'm not a really big fan of it because it caps upside and doesn't really help protect your downside at the same time. But, you know, this this is like have the aha moment right here.

[00:05:40]This dictates where stocks are going to go in the long term. And I know that we've talked about this chart many many times on the channel, but just to give you 10-year proof of where stocks actually go based on earnings per share.

[00:05:53]This is a 10year chart of the S&P 500 versus the earnings per share growth line. The black line right here is the earnings per share growth. The lighter line is the actual S&P 500 index. Do you notice basically the exact same thing that I was just talking about in 2022 when the market was above the earnings per share growth line? Were the future returns great from that point in time?

[00:06:15]No. The S&P 500 fell like almost 30% right here. But then when it was below the earnings per share growth line, remember that rubber band? It wants to fling back up. How are the returns going forward from this period of undervaluation right here? Dude, it was sweet. And of course, when you go see everybody online and they say, "Hey, what's your ROI in the last few years?"

[00:06:34]They perfectly start their ROI right here on the tip of my cursor to make themselves look best. When I show my ROIs, I started right here before COVID to show you that I actually do fine through bull markets and bare markets.

[00:06:45]But that's beside the point. So then after this rally happened, the market then got disconnected again before liberation day tariffs. So up here, it's like, hey, we're extended. We're above the earnings per share growth line.

[00:06:58]Maybe we should derisk a little bit.

[00:06:59]Maybe we should have less bought calls and less sold puts up here. And lo and behold, a catalyst always comes somehow and the market fell. Market went below the earnings per share growth line.

[00:07:08]Guess what? Undervalued right here.

[00:07:11]Guess what happened from there? Amazing future returns from that point. So now we had the Iran situation recently.

[00:07:17]Market came down and just barely touched the earnings per share growth line. So maybe it was like fair value right here.

[00:07:23]And then bam, now the market just sent to the moon obviously as everybody knows. So it's less compelling to be as bullish up here versus here or here or here or even here or even bottom of COVID, right? And we're not to tie the bottom of the market. It's just like, hey, anytime right here, if you would have held for a few years, you would have did good. Anytime right here, if you would have just held for a few years, you'll probably do good going forward. Same applies to this. When you have profit growth that is this strong, that's where the stocks are going to go in the long term. So hopefully you got a little bit of a gauge and a clue of like how to do this on something like Nvidia.

[00:07:54]So let's go into another stock. Let's go into something like Walmart. I think that would be a fun one to do for the video because Walmart is just like it's a really good learning experience and it's just like it's nuts to be honest with you. So Walmart's earnings per share growth in the last one year is up 5%. Literally just 5%. You can probably guess where I'm going to go with this.

[00:08:14]You're getting a 48 trailing price earnings ratio level on Walmart when it's only growing at 5% versus like Nvidia. you're getting a cheaper price earnings ratio level and a whole lot more growth, right? So, things are going to start to make more sense here in a second, but let's go plot this on a chart of Walmart because, hey, maybe Walmart's on a dip or something and we could just get a better gauge of what the stock is going to do essentially.

[00:08:38]So, I already did the math for you. This is a one-year chart of Walmart right here. And you could see that Walmart's earnings per share growth went up right here. It's hard to see, but it's 5%.

[00:08:48]This blue line right here is the earnings per share growth of Walmart.

[00:08:52]And this is the actual share price of Walmart. So when earnings per share only went up 5%, but the actual share price went up 32%.

[00:09:00]Do you see like oh my god, this stock is really really expensive right now, right? It doesn't mean that it's like has to crash immediately, but it's like we don't want to allocate bullishly up here, right? It's super extended. It's not compelling to do so. And again, if we just take a look at the price earnings ratio level, you see that it is 48, which is super super high. And what's happening right now is the Walmart's only growing at 5% per year for earnings per share. But as the share price goes up more as a percent versus earnings per share, the price toearnings ratio goes up. The stock gets more expensive. And when there's more expensiveness priced into a stock, you basically need perfection to play out in order to support that high valuation. So up here it's very obvious as the extreme example Walmart. You don't want to be super bullish right now on that one.

[00:09:46]Let's take a look at another one. Let's go into the big bad Apple. Okay, everyone loves Apple. They have a really good moat. They have really good pricing power. Everybody wants an iPhone. It's the best thing on the market right now.

[00:09:57]But you know, good company doesn't mean it's a good investment. So let's plot this line on Apple, too. Earnings per share growth in the last year. It's up, we'll call it 17% to make them look a little bit better. We'll round up this time. Price earnings ratio level is 35.

[00:10:10]So, you know, looks a little bit expensive just at first glance right here, but let's go figure out how much the actual share price went up on Apple.

[00:10:18]So, we delete this AAPL. Let's figure out how much the share price went up on this bad boy right here in the last one year. Apple here, Apple right here.

[00:10:28]Share price went up 39%. I'm in the way right here. I'm sorry. Share price went up 39%. 40% we'll call it 39.99.

[00:10:35]But remember, the earnings per share growth is only up 17%. So, let's go plot that line and see where Apple should maybe be trading at right now. We go from here. We're going to go up 17% of earnings per share growth, which is going to be right here. Apple's currently at 292. Fair value somewhere around $244 based on this chart right here. Okay. Do we see that Apple is a little bit extended? Do we see that the actual earnings per share growth line of Apple looks like this right now? When you have the disconnect of the share price going up much more than the actual earnings per share growth line, that just simply means that the valuation level is getting more expensive. The price earnings ratio level is getting more expensive. It's going higher. So theoretically, Apple should be somewhere in the 250 range. It doesn't have to be the exact share price of course, but it's just like look, it's clearly overvalued right here, right? And down here, it's like, hey, it's clearly undervalued down here below the earnings per share growth line. And if we just take a look, you could have bought anywhere in this whole window right here where it was below the earnings per share growth line. Let's say that you're not going to time a bottom perfectly because hey, nobody can. Let's go from right here to the returns to right now.

[00:11:42]Apple's up 37% in like what is this like 10 months we'll call it. All you had to do was buy when it was below the earnings per share growth line. Like this stuff is not rocket science, guys.

[00:11:51]Be less bullish up here. be more bullish down here and have a visual gauge in your head of where the overall S&P 500 and NASDAQ is at because this kind of like sets the tide for everything, right? So, if the S&P and NASDAQ are a full-blown bubble, it's likely that a lot of the companies we go through, the big dog companies are going to be a bubble, too, because that is part of the S&P 500. They make it a bubble because they're within it. So, if the S&P is close to fair value overall and you find a good company at a good price and you're close to this earnings per share growth line, like if Apple was around 250 right now, hey, maybe we would allocate, but it's not right here. And also, if we look at this chart, it is a little bit expensive. So, it doesn't mean Apple stock's not going to keep going up. It just means that it's not as bullish and compelling going forward from here. So, hey, in the investing world, we're boring just like Warren Buffett. He's the richest investor of all time for the most part in the stock market, but we would call his strategy super boring, right? I mean, you got to wait for a good company at a good price.

[00:12:50]You don't just want to go buy things to buy things and give into all this retail FOMO right now into many stocks that don't even make any money, right? It's craziness. All right, let's go through Amazon stock. This is a really good one.

[00:13:01]A lot of people requested this one. Take a look at it. Earnings per share clearly going up and to the right. Right, right, right. It's going up and to the right.

[00:13:08]So, that's 36% year-over-year. Let's take a look at what the actual stock price did in the last year on Amazon.

[00:13:15]So, 36% earnings per share growth, AMZN.

[00:13:19]Let's see what this bad boy did.

[00:13:21]One-year chart right here. We'll click here. We'll click here. I'll center myself up in just a second. Amazon stock in the last year went up 31%. Don't forget earnings per share went up 36%, which I'm in the way again. I'm sorry.

[00:13:35]Earnings per share went up 36% right here. Okay. So, we're going to go plot the actual earnings per share growth line. We're going to figure out where 36% would actually be. And hey, maybe Amazon stock is actually undervalued right now. So, this will be 36% right here for the profits did. And this is obviously where the share price went.

[00:13:51]So, we go plot this line right here.

[00:13:53]This is what's happening to Amazon's earnings per share growth. So, do we see the very clear disconnect right now? Do we see that in this time frame right here it would have been prudent to allocate very bullishly to buy some calls to sell some puts like the share price was 200 bucks down here like it was you know a decent ways below intrinsic value this was a time to be bullish on Amazon maybe not so much right here maybe a little bit right here but up here sure we're basically at fair value like we're within a couple percent Amazon stock based on looking at this chart right here could be viewed as at fair value but It's clear, be less bullish up here, be more bullish down here. And I know it's easier said than done because when stocks are down like this, something usually really bad is happening. But obviously, the market blew it out of proportion right here with the whole Iran situation. And then bam, the market's like, "Okay, you know, earnings per share is going up and to the right. That's the magnet. We're going to follow that." Okay, so now a way to go double check all of our work.

[00:14:51]I have a formula called the Grahams Revise formula. And what this essentially allows you to do is Benjamin Graham, by the way, is Warren Buffett's mentor. So they developed this calculator to basically plug in a few different things and spit out a fair value for a stock. So it's a completely independent way of what we just did with the charts to figure out something is over or undervalued. So we want to use this formula and we want to see if it correlates with what we just did earlier. So let's just go through a few different companies right here. You can see that Meta we agreed that it was undervalued. Current fair value is around 8.25. Current share price right now is 600 bucks. That correlates that checks the box. We take a look at Nvidia right here. We've said that the lines were pretty close have over overlapped right now. I see Nvidia fair value somewhere around 230. Currently, this is showing around 220. It is in the ballpark. It is very very close. We could agree that Nvidia is basically at fair value right now. Maybe even a little bit to the cheap side. If we go take a look at Amazon right here, we saw that Amazon the lines were basically close to each other. This shows me that Amazon is 7% expensive right now. Fair value around 250, currently trading around 268, but they're still very close to in the realm of each other. Now, if we go look at the bottom right here, the Walmart, let me get myself out of the way to see how bad this one really is.

[00:16:02]Walmart all the way on the bottom, fair value is somewhere around $45 per share.

[00:16:08]Currently trading around 127. So, do you see the clear and obvious things that we're looking at right here? Two completely different data sets, two completely different ways to value something, but they all basically complement each other. That is how you know what a stock is likely to do. So the goal is to allocate to something in a bearish way like Walmart I guess when it's extremely overvalued when it's very obvious and the goal of when something is undervalued very obviously to allocate very bullishly right that's the goal here so we don't want to go like head over heels bullish for something that's basically at fair value kind of like a a service now for example we want to go head over heels bullish for something that is maybe something towards the top of this list where it's clearly like super super undervalued but of course only looking at the valuations that's not going to give you the whole picture of where things are actually at.

[00:16:54]You want to look at the valuations, the growth of the company, if they have a actual moat, if competition is going to come and crush them. The execution risk, like how hard is what they're trying to do actually going to be. Like execution risk for Meta is like they're going to go run ads. Execution risk for something like Tesla, they're trying to build self-driving cars and robots that walk around your house and make you lunch or something like that. So, it's it's definitely harder and more execution risk for Tesla, right? And then of course the overall backdrop of the economy economic scorecard. I go through this stuff all day long and keep it always accurate. And then I show you guys my bull bear scale. Right now I'm a 6.5 out of 10. So I'm cautiously optimistic, but I am not bearish. I just think that things are going to take a little bit of a breather now with how far this market just ran. So that's what I got for you guys in this video right here. If you got value, like, subscribe, hype it if you want to. Drop a comment.

[00:17:42]Let me know what you thought. And if you want to learn more about my option strategy, click the link in the video description. 10day stocks and option transformation. It will truly blow your mind. It's not like anything you've ever seen before on YouTube. And with that being said, watch this video right here if you want to learn more about my option system without doing that. See you guys there.