Here’s Why the Cheapest “Magnificent Seven” Stock Is a Screaming Buy Right Now The Motley Fool

Also for stocks with the same PE Ratio, the one with faster growth business is more attractive. The Forward Price to Earnings (PE) Ratio is similar to the price to earnings ratio. The regular P/E ratio is a current stock price tesla pe ratio over its earnings per share. The forward P/E ratio is a current stock’s price over its “predicted” earnings per share. If the forward P/E ratio is higher than the current P/E ratio, it indicates decreased expected earnings.

  1. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.18% per year.
  2. The Zacks Equity Research reports, or ZER for short, are our in-house, independently produced research reports.
  3. As Peter Lynch pointed out, cyclical businesses have higher profit margins at the peaks of the business cycles.
  4. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
  5. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.

That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style. The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style. Gross margin is 18.25%, with operating and profit margins of 9.19% and 15.50%.

Tesla (TSLA)

The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. There is not a better “risk-taker with deeper pockets” than Musk that I’d like to bet on.

Still he said he would rather buy a company growing 20% a year with a PE Ratio of 20, instead of a company growing 10% a year with a PE Ratio of 10. The market capitalization sometimes referred as Marketcap, is the value of a publicly listed company. In most cases it can be easily calculated by multiplying the share price with the amount of outstanding shares. Companies with a P/E ratio over 30 or a negative one are generaly seen as “growth stocks” meaning that investors typically expect the company to grow or to become profitable in the future. Companies with a positive P/E ratio bellow 10 are generally seen as “value stocks” meaning that the company is already very profitable and unlikely to strong growth in the future.

Other News for TSLA

While Musk has often been faulted for being too optimistic, I’d rather have a leader who is overly optimistic and breaks the barriers of possibilities as a result. This helps Google Cloud customers accelerate the development of AI applications for their own purposes. Vertex AI saw an impressive sixfold increase in activity in the second half of 2023 compared to the six months prior.

The Price/Earnings ratio measures the relationship between a company’s stock price and its earnings per share. A low but positive P/E ratio stands for a company that is generating high earnings compared to its current valuation and might be undervalued. A company with a high negative (near 0) P/E ratio stands for a company that is generating heavy losses compared to its current valuation. It is the most commonly used metric for determining a company’s value relative to its earnings. In this example, we are using the actual earnings (EPS) for the trailing twelve months (or TTM). A stock with a P/E ratio of 20, for example, is said to be trading at 20 times its trailing twelve months earnings.

Ratios and Metrics (Annual)

There are at least three kinds of PE Ratios used by different investors. They are Trailing Twelve Month PE Ratio or PE Ratio (TTM), Forward PE Ratio, or PE Ratio without NRI. A new PE Ratio based on inflation-adjusted normalized PE Ratio is called Shiller PE Ratio, after Yale professor Robert Shiller. The Zacks Equity Research reports, or ZER for short, are our in-house, independently produced research reports. The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.

This metric is considered a valuation metric that confirms whether the earnings of a company justifies the stock price. There isn’t necesarily an optimum PE ratio, since different industries will have different ranges of PE Ratios. Because of this, PE Ratio is great to evaluate from a relative standpoint with other similar companies. As a current shareholder of Meta Platforms, Inc. (META) and a (sad) former shareholder of Nvidia Corporation (NVDA), I recall fondly the days that the market hated these names. The companies survived and their stocks came roaring back, at least quintupling in the process. But, American capitalism has thrived for centuries, rewarding the risk-takers with deeper pockets.

The PE Ratio, or Price-to-Earnings ratio, or P/E Ratio, is a financial ratio used to compare a company’s market price to its Earnings per Share (Diluted). Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company’s financial health and risk profile, aiding in informed decision-making. Because the PE Ratio measures how long it takes to earn back the price you pay, the PE Ratio can be applied to the stocks across different industries. That is why it is the one of the most important and widely used indicators for the valuation of stocks. To compare stocks with different growth rates, Peter Lynch invented a ratio called PEG Ratio. He thinks a company with a PE Ratio equal to its growth rate is fairly valued.

Darling technology stocks are making new highs and are busy overtaking each other in the four-comma club, while Tesla has fallen to the 11th spot in terms of market capitalization. Not many may recall this, but Tesla breached the $1 trillion level in 2021 and has since lost 40% of its value. Competition is heating up, and while total deliveries and revenue are still going up, they come at the expense of margin.

In the fourth quarter of 2023 (ended Dec. 31), Google Search delivered a record-high $48 billion in revenue, which equaled a 12.7% year-over-year increase. It was the fastest pace of growth since mid-2022, right before interest rates shot higher. The current PE ratio of TSLA is 86% lower than the 4-year historical average. Researching stocks has never been so easy or insightful as with the ZER Analyst and Snapshot reports. As an investor, you want to buy stocks with the highest probability of success.

Microsoft’s ChatGPT-powered Bing was first to market with a generative AI search engine, which threatened Google’s dominance and left Alphabet playing catch-up. If Google becomes faster, more convenient, and more accurate, it’s likely to keep its user base and advertisers happy. YouTube’s quarterly ad revenue also jumped 15.5% to a record $9.2 billion. For Shiller PE Ratio, the earnings of the past 10 years are inflation-adjusted and averaged.

I’m not suggesting it will soar that high, but the company’s accelerating growth and record financial results warrant a valuation more in line with the Nasdaq-100, at the very least. The PE Ratio can be viewed as the number of years it takes for the company to earn back the price you pay for the stock. For example, if a company earns $2 a share per year, and the stock is traded at $30, the PE Ratio is 15. Therefore it takes 15 years for the company to earn back the $30 you paid for its stock, assuming the earnings stays constant over the next 15 years. The Price to Earnings Ratio (PE Ratio) is calculated by taking the stock price / EPS Diluted (TTM).

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top
Scan the code