Tesla Inc (NASDAQ:TSLA) is the world’s most popular EV stock. The company does not manufacture the most cars of any company in the world, but it has the steepest valuation in the stock market. Lately, TSLA stock has not being doing so well. Its most recent quarter was a miss, falling behind analyst estimates on revenue as well as earnings per share (“EPS”). The electric vehicle maker did show pretty strong growth, just not as good as what the markets were expecting.
Tesla stock is still pricier than the vast majority of stocks out there. Trading at 44 times earnings, it is not even close to a value opportunity. However, it’s certainly cheaper – both in terms of dollars and the P/E ratio – than it was at $409. In this article, I will explore whether Tesla stock is a buy today, at $171.
Tesla’s last quarter: A miss, but good in some ways
Tesla’s most recent quarter missed analyst estimates on both the top and bottom lines. It was not necessarily a bad quarter in every respect, though. In it, the company delivered:
- $23.3 billion in revenue, up 23%.
- $4.5 billion in gross profit, down 11%.
- $2.7 billion in operating income, down 17%.
- $2.9 billion in net income, down 22%.
- $44 million in free cash flow, down 80%.
As you can see, the decline in free cash flow was absolutely staggering. A year ago, it was well over a billion, now it’s measured in the millions. Tesla spent much of Q1 slashing prices on its cars, and the result was this huge decline in profitability. It’s not surprising that the stock sank after this release came out, although it is worth noting that the revenue growth is still strong.
A steep valuation
Despite Tesla’s most recent quarter being rather unimpressive, its stock is still very expensive, trading at:
- 44 times earnings.
- 6.2 times sales.
- 11.2 times book value.
- 40 times operating cash flow.
This isn’t as expensive as Tesla used to be. However, it’s still expensive, and TSLA’s earnings are declining while its revenue growth is slowing down. Overall, it’s not a compelling picture, even after the big stock sell-off. In the next section, I’ll look at a Canadian EV stock that may fare better.
A Canadian EV stock that has a cheaper valuation than Tesla
If you’re looking for a more modestly valued alternative to Tesla, you could consider the Canadian car parts company Magna International (TSX:MG). It is mainly known as a supplier of auto parts to traditional car makers, but it also has an EV side business with LG, known as LG Magna e-Powertrain. LG Magna e-Powertrain manufactures a variety of EV parts, ranging from motors to power electronics. Unlike Tesla, Magna’s most recent quarter was a beat rather than a miss. Also, it’s far cheaper than Tesla, trading at:
- 13.9 times earnings.
- 0.4 times sales.
- 1.2 times book value.
- 7 times operating cash flow.
Magna International’s business was in decline for some time. Its revenue and earnings both fell over a period of five years. However, the auto gear maker’s most recent 12-month period actually saw modest 8.8% revenue growth. Perhaps that EV joint venture is starting to pay off.
