Tesla Motors Inc (TSLA): Is This Premium Electric Car Maker a Good Buy Now?

But extremely high PEG and P/S ratios

The market places a $12 billion market value on Tesla Motors Inc (NASDAQ:TSLA), which has generated $945 million in revenue and has reported an operating loss of $295 million in the past twelve months. Interestingly, Tesla’s market cap has risen significantly to be equivalent to 17% of Ford’s market cap and 22% of the General Motors’ market cap.

The market values Tesla Motors Inc (NASDAQ:TSLA) at more than 10 times its sales and nearly 60 times its book value. Ford and General Motors, with $58.9 billion and $45.7 billion, respectively, in their total market caps, have much lower P/S and P/B ratios. While General Motors is worth 30% of its total sales and 172% of its book value, Ford is valued at 43% of its total sales and 3.34 times its book value.

Many investors would argue Tesla’s high market valuation might be due to the high growth that it has experienced. However, its PEG ratio is also quite rich, as high as 42.7. Both Ford and General Motors have PEG ratios below 1, at 0.97 and 0.62, respectively.

My Foolish take

Although Tesla’s Model S is hot and intriguing, ranking the best selling electric cars in the U.S. in the first quarter, I would not invest in Tesla Motors Inc (NASDAQ:TSLA) at its current trading price. With an extremely high valuation, I would expect Tesla’s valuation would shrink in the near future. Among the three companies, I like General Motors the most, with a low valuation and the strongest balance sheet.

The article Is This Premium Electric Car Maker a Good Buy Now? originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG 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. Anh 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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