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> If I had more money to gamble, however, I'd definitely put some on Tesla in the current environment of foreseeable-future high oil prices. Before you buy the
by huijzer 5y ago
> If I had more money to gamble, however, I'd definitely put some on Tesla in the current environment of foreseeable-future high oil prices.
Before you buy the stock, please consider not only the fact that it is likely gonna be great but *also* the current price of the stock. You also wouldn't buy a car without knowing the price. The market cap of Tesla is currently 792 billion. Let's look at the operating cash flow since that is the money a company can sort of spend on whatever they want. Their operating cash flow for the year 2021 is about 11.5 billion. So, assuming no growth, they will need 68 of those years to be able to pay all investors back.
But, okay, let's assume some growth. Let's say 30% growth in cash flow per year which is a optimistic estimate. Few companies manage to get a 30% yearly growth; let alone for a longer period. They will need about 16 of those years (11.5 * 1.3^16 = 765 billion).
As another number, you can look at the PE Ratio. The average PE Ratio for the S&P 500 is 23.80 currently (https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio). In 2011 it got as low as 14 even. Tesla sits at 156!
- shrimpx 5y agoI like your analysis. Tangent: what do you think about $FB, which currently sits at a P/E of 14?
- huijzer 5y agoThanks. I don’t have an opinion on it. To form your own opinion, I can highly recommend watching a bunch of videos on YouTube with Warren Buffet, Monish Pabrai, Howard Marks and Ray Dalio and if you get the chance a (audio)book or two of some of them. Especially Warren and Charlie Munger have a great ability to put things into perspective.