What if TESLA was a Banana Stand that made a profit of $1 per day? ANALYSIS
**Lets say Sneed owns a Banana Stand that makes a profit of $1 per day.**
Chuck wants to buy a 50% share in Sneeds Banana Stand. Chuck asks himself, what is a reasonable price to pay for half of this banana stand?
If Chuck paid $500 for half of the Banana Stand:
* Total Banana Stand market value: $1000
* Total Banana Stand earnings for last fiscal year: $365
* Price to profit ratio (P/E ratio): 2.73
* Time to recoup his $500 investment: 2.73 years
Chuck is willing to take on a little more risk than this. Hell, this Banana Stand really shows a lot of promise! And Sneed, well, Sneed is like a genius! He had a great Banana Stand over on the other side of town that sold tons of bananas. What if Chuck paid ... $25,000 ?
* Total Banana Stand market value: $50,000
* Total Banana Stand earnings for last fiscal year: $365
* P/E ratio: 137
* Time to recoup his $25,000 investment: 137 years.
Chuck doesn't expect to hold his investment for 137 years. He believes that what's really important is not the money coming into the Banana Stand, but rather how other people like Chuck *feel* about the Banana Stand. See chuck is a growth investor - not a value investor.
Chuck feels really good about the future of this Banana Stand. It's only making $1 a day right now, but man Sneed is going to take this Stand places. Chuck decides to go all in and pay $289,080 for a 50% share in the Banana Stand.
* Total Banana Stand market value: $578,160
* Total Banana stand earnings for last fiscal year: $365
* P/E ratio: 1584
* Time to recoup his $289,080 investment: 1584 years