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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People usually look at the ratio between the price of a share and the earnings of the company divided by the number of shares.
Pretty much all the major car manufacturers typically have P/E ratios of something like 10 to 20. Tesla’s sits at something like 60 and in 2020 got as high as 900.
Having a high price to earnings ratio implies that investors think the firm is likely to grow in earnings in the future, in this case by a lot. It’s very easy to see why people might think investors are wrong about this and the stock is thus “artificially” inflated by hype.
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