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.
In: 284
There is a famous formula by Peter Lynch:
Price/Earnings = Growth
If a company’s stock is worth $100, and the entire company’s profits are $1/share, the company has to be growing at least 100%/year, every year, compounded for the next five years for it to be “valued correctly”.
Otherwise, you use the Benjamin Graham formula, which roughly works out to be:
Price/Earnings = 15 or so, depending on interest rates.
Tesla stock must be supported by Tesla’s ability to make money, otherwise, it’s speculation.
Latest Answers