More times than not, companies tout statistics other than net profits because the actual profits aren’t that good. Tesla (TSLA) is one such company that falls into this category. Today, Tesla emphasized that it is earning $0.71 per share in non-GAAP earnings. The reason they want to do that is because it makes the valuation of the stock sound slightly less insane. If they can make you think of Tesla as a company with earnings power of $2.84 per share in relation to its stock price of $200 per share, then the valuation of 70x earnings seems like something that can be justified after a couple years of 25% profit growth that matches revenue growth.
In Tesla’s case, the problem with citing non-GAAP earnings is that it ignores some upfront capital allocations associated with building the Gigafactory and the issuance of 15 million shares of Tesla stock that means each … Read the rest of this article!