I just saw a post that said Tesla stock is only worth 1/5 as much as it’s valued as. It doesn’t make sense to me.
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On one hand the value of anything is what people are paying for it now however ….
When deciding whether the stock of a company is priced according to fundamentals ain vestor may look at:
Price to earnings ratio (p/e)
Debt ratios and expenses
Cash flows
Revenue growth
And about a gazillion other “metrics” that you can plug into a formula to guess the expected value of a stock
So, if you use p/e a company that trades at a much higher ratio than similar companies might be over valued
Or if a certain stock has large revenue growth compared to peers but trades at a lower p/e it might be undervalued
Those are simple, one dimensional examples
The reality is that at the moment the market is random. Traders do what they do regardless of your calculations
However, the value investor relies on mean reversion. In the long run, fundamentals rule
I won’t comment on by belief of TSLAs value however by some metrics the current share price is higher than the underlying fundamentals demand
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