With an estimated net worth of $155 billion, Warren Buffett is the eighth richest person in the world, according to The Bloomberg Billionaires Index. What's stunning about Buffett's wealth is he acquired it primarily through stock market investments. And his tremendously successful investing style has made him the unofficial king of value investing.

For many people, investing falls into two opposing categories: growth investing and value investing. But in his 1992 letter to Berkshire Hathaway shareholders, Buffett made his thoughts on growth and value crystal clear. He wrote, "Growth is always a component in the calculation of value."

Buffett's pithy statement encapsulates an indispensable investing principle. It's a principle that investors should embrace and internalize to help them succeed in the market, and I can think of no better example to illustrate Buffett's point than stock market darling Nvidia (NVDA 1.69%).

Why Nvidia stock was counterintuitively a great "value stock"

Nvidia's core product is its graphics processing units (GPUs). Originally catered to the video game industry, the company's GPUs became increasingly useful for a variety of tasks, such as mining cryptocurrency and, more recently, running artificial intelligence (AI) applications. And the AI craze in recent years has propelled Nvidia stock to the forefront of investors' imaginations.

At the beginning of 2023, Nvidia stock traded at a seemingly expensive price-to-earnings (P/E) ratio of 62.

Such a high valuation would scare away most traditional value investors. After all, the P/E ratio for the S&P 500 was about 22 at the time, according to YCharts. Some believed the entire stock market was overvalued then as well, meaning Nvidia stock was nearly 3 times more expensive than this overpriced average.

However, with the benefit of hindsight, it's clear Nvidia stock was a superb value stock at the time.

On Feb. 26, Nvidia reported completed financial results for fiscal 2025 (ended Jan. 26). For this past year, the company generated earnings per share (EPS) of $2.94. Going back to the beginning of 2023, Nvidia's $14.50 share price (split adjusted) at the time meant it was valued at less than 5 times the fiscal 2025 earnings it just reported.

In other words, many value investors would likely have turned up their noses at Nvidia stock due its premium valuation, but this traditional approach to value investing doesn't account for growth. And as Buffett explained in his 1992 shareholder letter, growth is a crucial component in the value equation.

Let's highlight Nvidia's growth to drive this home. On a split-adjusted basis, the company generated EPS of just $0.17 in fiscal 2023. Its profits have jumped 17 times in just two years. Investors who factored a strong outlook for Nvidia into their decision-making process were more likely to see the attractive value proposition in Nvidia stock.

For what it's worth, shares of the company are up over 700% since the beginning of 2023.

What this means for investors today

Nvidia's incredible rise in the past two years is the perfect reminder of why you must evaluate stocks based on their future financial results, not their past track record.

Renowned investor Bill Miller also described this principle when he said, "As I often remind our analysts, 100% of the information you have about a company represents the past, and 100% of the value depends on the future."

And this is ultimately reflects Buffett's point as well. Businesses will change over time. Will they be more valuable or less valuable? How will their growth prospects evolve? These are the kinds of questions that investors should answer before buying a stock.

The reality is that investors won't be able to answer this question with every business -- each individual understands some businesses better than others. This is why Buffett encourages investors to stay within a "circle of competence." But for the businesses investors do know and understand well, they can spend time thinking about what those companies will be worth in the next three, five, or 10 years. And from there, they can make the call on how attractively valued a stock is based on those long-term opportunities.

Thinking this way can help investors avoid missing the train on life-changing opportunities such as Nvidia simply because they looked overvalued at the time.