Introduction
Tesla (TSLA) has been one of the fastest growing companies on the planet based on sales growth. Earnings growth, however, has been more erratic in the past, but is beginning to generate strong growth. As far as the stock price is concerned, it has been a roller coaster. From the middle of 2018 through most of 2021 the stock price grew over 2500% for an average total annual rate of return of over 300% per annum.
It could be argued that Tesla’s valuation was justifiable based on explosive earnings growth over that 4-year period. On the other hand, common sense would have suggested that the massive growth Tesla was generating based on earnings per share was unsustainable. In contrast, sales per share growth averaging over 23% was more sustainable and perhaps more realistic. Nevertheless, that level of sales growth suggested that Tesla was overvalued for the last quarter of 2020 and most of 2021.
Tesla
Finally, after an abysmal 2022 with the stock price falling over 65%, and dropping even further so far in 2023, the question is – has Tesla become a GARP (growth at a reasonable price) stock or a value trap?
Although they do not ring a bell at the top or bottom of the market, it is certainly indisputable that Tesla is a much better investment in January 2023, than it was in January 2022. Although the bottom may or may not be in, Tesla appears interesting at current levels. Never forget, valuation matters and it matters a lot especially for growth stocks.
FAST Graphs Analyze Out Loud Video on Tesla
— Chuck Carnevale
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Source: FAST Graphs