3 Things You Need to Know if You Buy Tesla Stock Today

Tesla's (NASDAQ: TSLA) stock is a battleground among investors, and the bull vs. bear debate will likely rage on for the foreseeable future. Because Tesla is a growth stock, the focus of the investment proposition should be on where the company will be in the future more than where it is now. In that vein, here are three things you need to consider before buying the stock.

The stock trades 78 times its 12-month trailing earnings and 207 times its 12-month trailing free cash flow (FCF). Those are nosebleed valuations, and it would be understandable if investors shied away from buying the stock on that basis. That said, Tesla is a growth stock, and it's a good idea to value it accordingly.

For example, consider its FCF and how Tesla's growth-capital spending is eating into it. By comparison, here's a look at a mature, low-growth industrial like 3M. As a rough rule of thumb, you could think of a company's depreciation and amortization (DA) as representing its "maintenance-capital spending." Consequently, any capital spending exceeding the value of its DA can be classified as "growth-capital spending."

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Source Fool.com