Tesla Motors Inc (TSLA): There’s More to the Story

Foolish bottom line
Regardless of Tesla’s growth prospects, the valuation remains far too high to warrant any fundamentals-based investment. Since all trailing earnings are negative, let’s use a sales basis for measurement. Tesla Motors Inc (NASDAQ:TSLA) trades at a trailing price-to-sales ratio of more than 12. That number will, without doubt, come down in future quarters and years as the company continues to race toward scale. Still, it is far too much to pay given the downside risk — not achieving scale, competition, and so on. For comparison, Ford Motor Company (NYSE:F) trades at a price-to-sales of 0.38 and has a far, far more stable business to forecast. Cheaply valued and on the brink of a new product cycle, General Motors Company (NYSE:GM) trades at a ratio of 0.25.

Tesla’s valuation will trend down as the company’s earnings catch up to market fervor, but a value-conscious investor couldn’t invest in the company at today’s price.

Keep a close eye on coming earnings announcements, and make sure to focus on the company’s manufacturing metrics. These will tell more about the future success of the company than any of today’s financials.

The article There’s More to the Tesla Story originally appeared on Fool.com and is written by Michael Lewis.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors and owns shares of Ford and Tesla Motors.

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