No. of Recommendations: 3
This is how I value high growth, high pace of innovation, entering new product categories companies ... by looking at the change in value, not the GAAP earnings. My January post from the Tesla board:
Jan 6, 2023
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#392,295
Now that 2022 is over we can look back and calculate a (CK)non-GAAP PE for the year. Non-GAAP in that I make adjustments for changes in the value of assets held instead of looking only at earnings. An example of that would be that if you owned a $1M home that went up 100K in value. Your GAAP earnings were zero but your (CK)non-GAAP earnings would be 100K. Giving your house a (CK) PE of 10. Another example would be to look at the GAAP earnings of the Mona Lisa. The earnings are accrued over decades but only recognized on the sale. So, a PE of infinity and then almost zero. So much of our earnings at Tesla are not reflected in the profit and loss statement I think it makes GAAP near useless in determining the value of our shares.
So, here we go. My unofficial official earnings report for 2022:
- 10B. cash earnings.
- 100B. value of FSD. (based on 1T when done. We went from 70% to 80% complete.)
- 10B. Semi "start" of production.
- 10B. CT prep for mass production.
- 1B. value of work done to get lithium refinery going.
- 10B. Bot progress. Mostly in the form of real world AI.
- 5B. factory buildouts and improvements.
- 10B. Tesla Energy nearing ramp.
- 10B. skunkworks projects.
166B total of value created but not recognized.
Puts the current "real" PE at somewhere between two and three. Around eight at our highest valuation.
Someone earlier asked what they should tell their son who worried that Tesla was trending towards being a big car company that didn't reward its investors. My answer would be to go through all the progress Tesla made during the year in setting the stage for future earnings. Earnings that will be returned to shareholders in dividends, share repurchases or share price appreciation. (See BRK.A for an example.)
We need to get out of the 12 month Wall Street price target earnings modeling rut. Current profits only matter in that they help fund future innovation ... and we're way past having to worry about issues like that.
Bought more TSLA today.
