Tesla (NASDAQ:TSLA) stock is up 25% in a month and 36% over 12 months. However, these statistics disguise the volatility of the share price.
The company’s 24 month Beta (a measure of volatility) is 1.92 — anything above one is normally considered volatile.
There’s no doubt Elon Musk has something to do with this. After all, this is the man who once suggested the share price was “too high“.
However, investors are also constantly having to readjust their forecasts in this fast-moving sector as Tesla attempts to fight off competition.
Getting pricey… again
Tesla has a dominant position in the electric vehicle (EV) sector. In the third quarter, the firm produced over 430,000 vehicles and delivered over 435,000. That’s huge compared to its peers. As mega-investor Cathie Wood commented, Tesla is in “pole position to dominate“.
It’s also got a host of exciting innovations that could drive the company forward. For example, industry disruptor Musk is looking to self-drive vehicles to unlock greater value for investors.
While the CEO said the company would achieve full self-driving capability in 2023 — which it appears to have done — it’s unlikely to contribute positively to net income until the end of the decade.
So for now at least, Tesla stock is looking expensive. It trades at 79.6 times TTM (Trailing 12 months) earnings and 93 times forward earnings. By comparison, Porsche AG, which also has an exciting EV future, trades at just 13.8 times TTM earnings.
The price/earnings-to-growth (PEG) ratio is also telling. This is a metric that takes into account growth by dividing the price-to-earnings (P/E) ratio by the forecasted EPS (earnings per share) growth rate over five years.
Normally, a PEG ratio of one suggests fair value, under one is undervalued, and over one is overvalued. Tesla’s PEG ratio is 4.1. That’s very expensive.
Alternatives
Of course, it makes sense to look at some of Tesla’s peers. NIO is one attracting interest from investors in recent months.
That’s because the stock has slumped, again. It’s currently trading around its support level — $7 — but has continually failed to live up to expectations.
I’m certainly interest in NIO and I wouldn’t be surprised to see the stock double in value in the coming months. But it’s very volatile and the surge may be unsupported by company performance.
That’s why I’m increasingly looking at Li Auto. Like NIO, it’s a stock I’ve previously owned. But on this occasion, I believe it’s one I sold too soon.
Li Auto has a PEG ratio of 0.1 and it’s among the cheapest I’ve come across. However, I’m wary of geopolitical challenges that could hamper the firm’s growth into North America and Europe.
Nonetheless, China is a huge market, and this stock has great growth prospects. So I’m looking to buy in again.
