Who before the year 2020 Teslashares (NASDAQ:AMD) and haven’t sold them in the meantime can look forward to big price gains. Even if the stock has moved slightly away from its all-time high, the price would still have increased by more than 1,000% (as of July 21, 2022, relevant for all prices).
Quite a few investors have probably gotten rich with this one investment. But Tesla is extremely highly valued relative to current earnings.
Earnings per share last fiscal year were $4.90. Right now, you’re paying 159 times earnings for a share of $780! So the stock market has high expectations for the company’s future profits.
The situation is completely different for domestic car manufacturers.
Car stocks are cheap
Volkswagen (WKN: 766403) for example achieved an earnings per share of EUR 29.65 last year. A preferred share currently costs EUR 135.80. So you’re only paying about 4.5 times last year’s earnings for the highly profitable automaker!
It is very similar to the competitor bmw (WKN: 519000) from. At BMW, a total of 18.79 euros of net profit per share was stable last year. Nevertheless, you pay only 76.77 euros for a share. So here too the ratio between price and earnings is extremely low 4!
In addition, both stocks provide a very decent dividend. The dividend yield for both stocks is currently over 5%. Even if the shares do not budge for the next few years, you can look forward to a nice return here.
But the question is obviously much more important: Can Volkswagen and BMW soon overtake their competitor Tesla and be valued accordingly on the stock exchange?
Is it enough for a multiplication of share prices?
After all, both groups are significantly larger in terms of car sales, revenue and profit. Still, it’s unlikely that either company, or perhaps both, will overtake Tesla. At least not if Tesla remains highly valued. It is quite unlikely that BMW or Volkswagen will reach a valuation of more than 500 billion euros anytime soon.
Because the high valuation in Tesla’s case is based on the combination of extremely fast growth and high profitability at the same time. After the first half of the year, Tesla, for example, has already reached around the profit for the whole of last year. And for the next few years, Tesla plans to continue to grow extremely fast.
BMW and Volkswagen, on the other hand, will be busy converting their model ranges to electric cars in the next few years. Correspondingly high growth rates can only be expected in relation to the number of electric cars sold. There is also the question of whether the two car manufacturers can sell their electric models at a similar profit.
Overall, in my view, it is unlikely that BMW or Volkswagen’s valuation will increase significantly in the coming years. Of course, a doubling is not impossible, but a price increase of the order of 1,000% is highly unlikely. If you’re looking for high-yield stocks, the two automakers are definitely worth a look. But if you want to get rich quick, you better keep looking.
The article Get rich from sharing cars – is it possible with Volkswagen and BMW? first appeared on The Motley Fool Germany.
Our top stock for 2022
There’s one company whose name is getting a lot of buzz from analysts at The Motley Fool these days. It’s for us THE best investment for 2022.
You could also benefit from that. To do this, you must first know everything about this unique company. So now we have one free special report prepared which introduces this company in detail.
Click here to download this report now for free.
Dennis Zeipert owns none of the shares mentioned. The Motley Fool owns shares in and recommends Tesla and Volkswagen, and recommends BMW.
Motley Fool Germany 2022