Tesla Motors Inc (TSLA), Ford Motor Company (F): Danger! High Voltage Stock Ahead!

At the same time, Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) sport price to tangible book ratios of 3.36 and 2.4 respectively. This is still more than Ben Graham would’ve been happy paying, for sure. Sometimes paying a bit above book value can be justified for an enterprise with significant intrinsic strength, however.

Final foolish thoughts

I think that what Tesla is doing is really cool. Sadly, coolness is one of the last things you want in your stocks; boring and under the radar is the way to go. Tesla is both a top dog and a first mover in the electric car industry which will more likely than not be huge someday. Consumer Reports called its Model S the best car that they’ve ever seen. What Tesla is doing is great for the environment and I love owning companies like that.

Tesla is still a company that has no proven track record of success, however. Hurdles lie ahead for the company. While the Model S may be the greatest automobile ever to hit the market, it still costs over $60,000 which isn’t something that the average American will be able to afford anytime soon.

Tesla’s current valuation is in no way, shape or form justified by its fundamentals. It’s all based on hype at this point, and investing in hype can have dangerous consequences. Can anyone name a company that they invested in while selling for over 70 times its tangible book value that turned out to be a winner?

Tesla may become the dominant automaker in the world at some point, but right now that is far from certain. Unless the company increases its earnings at rates that have never been achieved before, buying its stock now would be a very bad choice. Be patient, and Tesla will likely fall from its lofty heights. In the meantime, you are far better off investing in Ford Motor Company (NYSE:F) or GM.

The article Danger! High Voltage Stock Ahead! originally appeared on Fool.com and is written by Ryan Palmer.

Fool blogger Ryan Palmer has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors . The Motley Fool owns shares of Ford and Tesla Motors. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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