Tesla (NASDAQ: TSLA) stock has been on a wild ride recently. Over the last year, it has traded as low as $169 and as high as $488 (it’s currently back at $249).
The question is: how much is the stock really worth? Let’s crunch the numbers.
Working out the true value
There are a number of ways to calculate a stock’s true value. One common strategy is to use a discounted cash flow (DCF) model. This involves forecasting the company’s future cash flows. These cash flows are then discounted using a certain interest rate to obtain a present value and added together to obtain a stock price.
Developing a DCF for Tesla is not easy though. For a start, its cash flows are extremely volatile (free cash flow in 2024 was $1.02 per share in 2024 versus $2.17 per share in 2022). Secondly, this is a disruptive technology company that is working on multiple projects including electric vehicles (EVs), autonomous vehicles, battery storage, humanoid robots, and artificial intelligence (AI). So its future cash flows are very hard to predict.
Using earnings per share
A simpler way to obtain an idea of a stock’s true value is to look at the company’s earnings per share (EPS) and then apply an earnings multiple to get a stock price. The earnings multiple is essentially a price-to-earnings (P/E) ratio – one of the most common valuation tools for stocks.
This approach has its flaws (working out the right earnings multiple to apply is hard). But it can be a good place to start, so let’s do it for Tesla.
The right price
For 2025, the consensus analyst forecast for Tesla’s EPS is $2.68. This may not be accurate but I’ll use this figure in my calculations.
Below, I’ve applied five different earnings multiples to this EPS figure. For context, the median earnings multiple across the S&P 500 index is about 18 today while the average multiple across the ‘Magnificent 7’ is around 35 (this has been boosted by Tesla’s high valuation).
| Earnings multiple | Stock Price |
| 30 | $80 |
| 40 | $107 |
| 50 | $134 |
| 60 | $161 |
| 70 | $188 |
I think Tesla deserves to trade at a premium to the S&P 500. After all, it has a lot of long-term growth potential due to its exposure to AI and autonomous vehicles.
That said, its EV business is a bit of a car crash at the moment (sales are plummeting worldwide due to increased competition and attitudes to CEO Elon Musk). So, I’m not convinced the stock deserves a sky-high multiple.
For me, an earnings multiple of around 40 is about right for this stock. That’s over twice the US market average (and higher than Nvidia, which is on 26).
That gives a stock price of $107. To my mind, that’s what Tesla stock is really worth today. That’s a little over 50% below the current share price. In other words, I see Tesla as overvalued at present.
It’s worth noting that the EPS forecast for 2026 is $3.64. And applying an earnings multiple of 40 to that takes us to $146. That’s a significantly higher price but it’s still well below the current stock price. So, I won’t be buying Tesla shares at current prices.
