Tesla Motors Inc (TSLA) Would Have No Place in Warren Buffett’s Portfolio

Tesla Motors Inc (NASDAQ:TSLA) is a company that generated much hoopla when it debuted because of the niche product it was offering. It created even more buzz when it went public; so much so that its price the day of the IPO was above its target price.

If you are considering investing in Tesla Motors Inc (NASDAQ:TSLA), but you have doubts, consider one of the most trusted methods investors use in determining worthy investments. This method is commonly called the “Warren Buffett Way.” Apply the principals of this method and ask yourself, would Tesla Motors Inc (NASDAQ:TSLA) be included in as a Berkshire Hathaway position?

Warren Buffett

Here’s a full list of Buffett’s stock holdings.

Before going into the principles of the Warren Buffett Way, let’s review Tesla Motors Inc (NASDAQ:TSLA). Founded by Elon Musk in 2003, the company’s niche is building high-end autos that are powered by electricity. You may recall the first electric cars to enter the market; they were nothing to be excited about as far as being aesthetically pleasing to the eye. The length of time you could drive the car without charging it also left more to be desired.

Musk, who is the chairman and CEO of Tesla Motors Inc (NASDAQ:TSLA), sought to change the image of electric vehicles, and to his credit, he did just that. Under his watch, Tesla Motors Inc (NASDAQ:TSLA)’s models include the Roadster, the Model S sedan and the Model X SUV. Automobile Magazine named the Model S its “Car of the Year,” citing its design and impressive speed.

Return on investment

With that being said, let’s look at how Tesla stacks up when it comes to one of the principles of the Warren Buffett’s Way – return on investment. The theory is based on how much of a return there is on invested capital. In Tesla’s case, this needs improvement; it is -72.22%. Remember, this indicator measures the strength and historic growth of a company’s return on invested capital. TheStreet Ratings recently ranked Tesla at the bottom of companies it reviews for income generated per dollar of capital.

Also part of the Buffett Way’s valuation of a stock is the company’s earnings per share. Tesla’s EPS for the fourth quarter missed estimates, coming in at $.65, which amounted to a lost of about $75 million. A bright spot were sales, which totaled about $306 million.