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When do you expect Tesla Motors Inc. to reach a P/E (price to earnings ratio) of 100?

Discussion in 'TSLA Investor Discussions' started by Benz, Feb 9, 2014.

  1. Benz

    Benz Active Member

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  2. adiggs

    adiggs Active Member

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    I agree with the conclusion of that article, but not for the reasons taken in the article. In particular, the article Elon tweeted about, with Model S used cars being worth more than new Model S's - that's just flat out misleading. Misleading is misleading, whether it's shorts trying to tear the company down, or longs trying to build the company up.

    It might even be that there is data from that source that would support that conclusion, but the numbers presented are misleading (and I added my comment along those lines to the article).


    Assuming the question is when will TSLA achieve a 100 P/E using trailing twelve months data, it might be awhile as the financial sites tend to report that value using GAAP accounting. I'm all in favor of being exceedingly conservative with the financial reporting, but treating the buy-back guarantee for cars financed through the preferred lenders as a lease is, IMHO, stretching the bounds of conservatism. On the plus side, that delayed revenue will be building, though always trailing a fast growing company, as the quarters roll along.

    My guess - TTM P/E = 100 on GAAP financials will be more like end of 2015, mostly due to GAAP losses along the way, and likely to shoot way beyond 100 when they do get there. Or put another way, I'm expecting share price > $500 before P/E 100.
     
  3. Benz

    Benz Active Member

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    "Or put another way, I'm expecting share price > $500 before P/E 100."

    Now that is very interesting. If I understand it correctly, that would mean that you expect the EPS to grow at such a pace that the TSLA share price reaches $500 before the P/E reaches a level of 100?
     
  4. sleepyhead

    sleepyhead Active Member

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    I don't really understand the question in the title of this thread...

    TSLA is already trading at a 300x PE ratio based on 2013 Analyst consensus EPS. Next year as earnings go up, the PE ratio will come down: lets say hypothetically that TSLA earns $3/share in 2014 and the stock price is $300, so a 100x PE ratio.

    Then in 2015 if TSLA earns $5/share you might see an 80x PE and $400 share price. As TSLA expands to $10/share you might see a 50x PE and a $500 share price.

    PE ratios go down with time as companies grow earnings and into their valuations. Anyway it is pointless to talk about PE ratios when a company is running very close to break even and has potential to run significantly above break even in the near future.

    Talking TSLA and PE in the same sentence is a worthless exercise and a complete waste of time. PE ratios are only good for mature companies where earnings grow 10% YoY and not by 300% YoY like with TSLA.
     
  5. Benz

    Benz Active Member

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    In the article the author talks about a P/E of 100 in combination with an EPS of $5 (resulting in a TSLA share price of $500).

    I understand that you think that a P/E of 100 in combination with an EPS of $5 (resulting in a TSLA share price of $500) is not very likely? And I understand that you think that a different combination of values of P/E and EPS are more likely?
     
  6. TSLAopt

    TSLAopt Active Member

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    I also think PEs are just about meaningless for ultra high growth companies. I would rather have the company of the stock I own grow faster than not grow its revenues as much so it could produce more earnings per share now.
     
  7. sleepyhead

    sleepyhead Active Member

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    What I am saying is that when TSLA does make $5 per share in 2014 or 2015, it might trade at 30x PE or 200x PE or anything in between. Talking TSLA and PE is a pointless exercise at this stage.
     
  8. Benz

    Benz Active Member

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    I don't think it's a pointless exercise, as it does matter at which P/E it trades (when EPS is $5):
    P/E 10 will result in TSLA = $50
    P/E 100 will result in TSLA = $500
    P/E 1,000 will result in TSLA = $5,000
     
  9. Bgarret

    Bgarret Model S ownin' Michigan scofflaw

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    I'm with Sleepyhead on this one....earnings model I have has TSLA at $3.50 - 4.00 in 2014, potentially $7.50 - 8.00 in 2015 and north of $10 in 2016...when will they reach $500/share or 100x EPS? Who knows. If they execute like they have, they will meet $500 and potentially "earn" a 100x multiple, but I would not hazard to guess which will come first the chicken, the egg, the EPS, the multiple, the stock price...etc.

    Good luck to all tomorrow...and the day after..etc, etc, etc.
     
  10. ggr

    ggr Roadster R80 537, SigS P85 29

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    But you say that as if it is cause and effect; it isn't! Both P and E are results of a number of other factors.

    I believe the original (Seeking Alpha) author was referring to the P/E ratio coming *down* to 100. "Normal" companies usually get to such P/E ratios by badly missing their profitability targets, while still actually making a profit. (No positive earnings means undefined P/E.) Hence, for a "Normal" company, this often starts a death spiral. Tesla's P/E is so high because it's just coming into view.
     
  11. adiggs

    adiggs Active Member

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    I'm looking at the trailing twelve month EPS reported by Yahoo etc.. Based on TTM EPS, and EPS based on GAAP measures, I expect TSLA to be reporting GAAP losses for awhile, while we're all busy celebrating the increasing pace of cash flow and non-GAAP earnings. For that reason, TTM P/E today is negative. I do expect TTM PE to go positive in the future, but that's why I say we might see share price > $500 before we see P/E 100. We have earnings to go to get a TTM PE ratio right now, and share price is closer to $200 than not.


    Another and different way to say it - P/E as others have commented just isn't all that interesting to me. Notice that the PE's others have used is the upcoming 12 month analyst consensus estimate of PE ratio. And are we talking GAAP or non-GAAP earnings? I consider GAAP earnings on Tesla to be misleading in a bad way to the investor, and non-GAAP to be the superior representation of how the business is actually performing.

    Price is easy - share price of the stock. Earnings though come in so many flavors, it makes a P/E ratio hard to be specific about.
     
  12. Robertj

    Robertj Member

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    I agree with Sleepyhead

    Share price in a high growth ( sales ) and relatively new company is about future potential earnings

    Price Earnings ratios , highly respected , by accountants , which I am , are lagging indicators of price movements and
    not useful in determining current price levels in a Tesla type of company in its current stage of growth

    Of more concern is

    expected sales growth
    expected increase in gross margin
    cash flow requirements/ surpluses
     
  13. Benz

    Benz Active Member

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    OK guys, there are other figures that we can look at. That is absolutely right, and they surely are more interesting than a P/E ratio. But doesn't a high P/E ratio tell us something about the confidence and future expectations that investors have in Tesla Motors?
     
  14. TSLAopt

    TSLAopt Active Member

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    A really high PE probably just means that investors think the same way most of us do in that PE doesn't really matter in such a high growth stock like this or AMZN for the past 5 years.
     
  15. Clprenz

    Clprenz Member

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    I expect a P/E of 100 this year... Their EPS should be above $2-$2.50
     

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