Does Tesla’s P/S Ratio Make Sense?

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Trefis explores whether Tesla’s (NASDAQ: TSLA) P/S Ratio Makes Sense in a detailed interactive dashboard, and finds that the electric vehicle pioneer’s current P/S Ratio might present an opportunity. While Tesla’s P/S Ratio is much higher compared to rivals Toyota and Ford, its higher growth rates and scope for margin expansion do justify its multiple. Tesla’s P/S is slightly below Amazon’s on account of Amazon’s higher margins and more consistent Revenue growth, although Tesla may offer more upside due to its strong product pipeline and economies of scale which could bolster growth and margins in the near-term.

View our interactive dashboard analysis Does Tesla’s P/S Ratio Make Sense?

Tesla’s P/S Ratio stood at about 2.6x in 2018, down from 7.4x in 2014

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  • This was driven by growing Revenues and improving Net Margins, which are likely to turn positive in 2020.

Tesla Vs. S&P 500

  • While Tesla’s P/S has been historically higher than the S&P, it has been declining fast and is likely to come in slightly below the S&P in 2019.
  • While Tesla’s margins remain negative, compared to the S&P 500 which has close to double digit margins, the company’s higher revenue growth lends support to a higher multiple.

Tesla Vs. Ford

  • Tesla’s P/S remains significantly higher than Ford’s (2.3x vs. 0.2x in 2018)
  • Tesla’s Revenue growth has been significantly higher compared to Ford’s (82% vs. 2.3% in 2018)
  • While Tesla’s margins remain negative, compared to Ford which posted margins of about 2% in 2018, it should post higher margins in the long-run, given its higher gross margins and increasing mix of software sales.

Tesla Vs. Toyota

  • Tesla’s P/S is higher than Toyota’s (2.3x vs. 0.6x in 2018)
  • Tesla’s Revenue growth has been significantly higher compared to Toyota’s (82% vs. 3% in 2018)
  • While Tesla’s margins remain negative, compared to Toyota which posted margins of about 8.5% in 2018, it should post higher margins in the long-run, given its higher gross margins and an increasing mix of software sales.

Tesla Vs. Amazon

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