Time to Tap the Breaks on Tesla Motors Inc (TSLA)?

Page 1 of 3

Tesla Motors Inc (NASDAQ:TSLA) is off to a tremendous start in 2013. The company reported its first profit in its history last quarter and did so in dramatic fashion, destroying analyst estimates in terms of both vehicles sold and earnings per share. Additionally, a string of positive news ranging from the early repayment of a U.S. government loan to the crowning of the Tesla Model S as Motor Trend’s 2013 Car of the Year has generated significant excitement around the company and the stock.

Tesla Motors Inc (NASDAQ:TSLA)

Add in a visionary CEO with ambitious plans to roll out a network of superchargers that will make fast charging a reality as well as allow for coast-to-coast travels in a Model S, and this stock chart for Tesla Motors Inc (NASDAQ:TSLA) so far in 2013 begins to make a little bit of sense:


TSLA data by YCharts

While the company’s stock has settled a bit from the high of $114 reached in May, Tesla Motors Inc (NASDAQ:TSLA)’s current market capitalization of over $11 billion presents an interesting quandary for current and prospective investors in the company. Does the company have the growth potential to warrant a premium valuation above its peers such as the one awarded to Amazon.com, Inc. (NASDAQ:AMZN), or should Tesla Motors Inc (NASDAQ:TSLA) be thought of using the same metrics as other car companies such as Ford Motor Company (NYSE:F or General Motors Company (NYSE:GM) ?

Growth certainly deserves a premium

A quick look at Tesla Motors Inc (NASDAQ:TSLA)’s past, present, and future shows tremendous growth. During the first quarter, Tesla reported delivery of almost 5,000 vehicles. While this total blew past analyst expectations, CEO Elon Musk recently laid out a plan for the company to reach an annualized run rate of 25,000 vehicles by the end of the year and a long term projection of 500,000 vehicles per year.

That’s some serious growth, and it comes from a number of drivers that the company hopes to exploit simultaneously. First, the company has a very small geographic footprint at the moment, which is expected to expand dramatically both within the United States and internationally. Second, the company has announced its plans to enter the SUV market in 2014 with the Model X and has already hinted at future releases of vehicles at lower price points. Third, the company simply does business differently than other automakers; Tesla owns its own sales channels and provides access to superchargers at no charge to existing Tesla owners. This very different approach has resonated with customers and is expected to continue to result in market share gains.

In combination, management expects new vehicles and new markets to help propel the company to 500,000 vehicles a year. Analysts expect that the company will deliver uncommon revenue growth for a car company, with revenue expected to grow by 358% and 27% in 2013 and 2014, respectively.

A dose of reality

Tesla’s growth trajectory is certainly worth a premium, but the big question is: how much? Here’s a look comparing Tesla’s fundamentals to its competitors:

TSLA F GM TM HMC
CAPS rating (out of five stars) 1 star 4 stars 2 stars 3 stars 5 stars
Share price $97.76 $15.68 $33.89 $117.55 $37.57
Market capitalization $11.3 $61.6 $46.6 $186.2 $67.6
TTM revenue (in billions) $0.9 $137.6 $151.4 $280.4 $125.5
TTM price to sales ratio 12.83 0.45 0.31 0.68 0.56
2013 estimated revenue growth 358% 7.5% 2.1% -17.3% -2.9%
2014 estimated revenue growth 27.0% 5.2% 6.6% 6.1% 18.6%
TTM price to earnings ratio N/A 10.63 11.62 15.23 14.51
Forward price to earnings ratio 94.00 9.39 7.72 11.39 12.96
Five year expected earnings growth 32.9% 11.9% 15.5% 44.9% 28.8%
Dividend yield 0.0% 2.6% 0.0% 1.2% 2.2%
Source: Motley Fool CAPS and Yahoo! Finance – 6/2/13

Price to sales is probably the most comparable measure among the automakers in the table above. While the peer group of major car companies has price to sales ratios in the range of 0.50, Tesla’s P/S ratio of 12.83 certainly stands out. None of the other companies have the same growth opportunity as Tesla or as revolutionary a product, but trading at a premium of 25 times the peer group is certain worth taking a moment to consider.

Page 1 of 3
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!