Tesla Stock Has a Sky-High Valuation Here’s the Math That Makes It Work.

If a company can grow its earnings, it takes fewer years for the company to earn back the price you pay for the stock. As a shareholder, you want the company to earn back the price you pay as soon as possible. Therefore, lower P/E stocks are more attractive tesla price to earnings ratio than higher P/E stocks so long as the PE Ratio is positive. Also for stocks with the same PE Ratio, the one with faster growth business is more attractive. The detailed multi-page Analyst report does an even deeper dive on the company’s vital statistics.

Generally speaking, a high P/E ratio indicates that a stock is expensive compared to similar stocks with lower P/E ratios. That doesn’t necessarily mean it’s a bad investment, however. It’s important to look at P/E ratios in the context of other factors that make a company worth investing in.

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The company has a current ratio of 1.53, with a Debt / Equity ratio of 0.07. Similar to the PE Ratio without NRI or PS Ratio or Price-to-Operating-Cash-Flow or Price-to-Free-Cash-Flow , the PE Ratio measures the valuation based on the earning power of the company. This is where it is different from the PB Ratio , which measures the valuation based on the company’s balance sheet. As an investor, you want to buy stocks with the highest probability of success.

• In addition, with the opening of the Gigafactory and the acquisition of SolarCity, Tesla now offers a full suite of energy products that incorporates solar, storage, and grid services.
• Tesla’s dividend yield of 0.0% is less than the industry average for motor vehicles and motor vehicle equipment stocks listed on the NASDAQ.
• The Zacks Equity Research reports, or ZER for short, are our in-house, independently produced research reports.
• Since it looks at the average over the last 10 years, Shiller PE Ratio is also called PE10.
• The industry with the worst average Zacks Rank would place in the bottom 1%.

Theprice-to-earnings ratio (P/E)is one of the most widely used metrics for investors and analysts to determine stock valuation. In addition to showing whether a company’s stock price is overvalued or undervalued, the P/E ratio can reveal how a stock’s valuation compares to its industry group or a benchmark like the S&P 500 index. Tesla’s price/earnings ratio of 57.31 exceeds the industry average for motor vehicles and motor vehicle equipment stocks listed on the NASDAQ.

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A company with a high negative P/E ratio stands for a company that is generating heavy losses compared to its current valuation. If you ever watch the financial news before the stock market opens for the day’s trading, you may hear about movements in the “stock futures.” One of the main reasons that futures prices are discussed… P/Es below 15 are considered low and P/Es above 50 are considered high, so on its face, a P/E of 30 is comparatively neutral. You can determine whether it’s good by looking at the company’s P/E ratios over time, and comparing the current ratio to the ratios of similar companies. It’s also a good idea to research the company’s financial performance to get a sense of whether it’s likely to grow.