Tesla Vs. JPMorgan: Two Of World's Largest Companies Show How Investors Favor Growth Over Value

Tesla Inc TSLA, the eighth most valuable company in the world, is worth $1.24 trillion. Banking giant JPMorgan Chase & Co JPM ranks 13^th with a market cap of $749.15 billion.

Comparing EVs to finance may seem like apples to oranges, but many consider Tesla to be more than a traditional auto stock. Also, the comparison and use of financial tools like price-to-earnings ratios can help show when companies are overvalued or undervalued.

What Happened: Tesla recently reported fourth-quarter and full fiscal-year financial results. Its revenue and earnings per share missed analyst estimates in the fourth quarter.

For the full fiscal year, Tesla reported $8.4 billion in net income and earnings per share of $2.42. Its profitability as an EV company differs from competitors who continue to lose money. Tesla's focus on scale and vertical integration has helped.

With earnings per share of $2.42 and a share price of $384.70, Tesla stock has a price-to-earnings ratio of 159.0. This is on the high side even for the fastest-growing technology stocks, which puts the question on how Tesla should be valued into question.

JPMorgan also recently reported its full-year financial results. In the last fiscal year, JPMorgan had net income of $58.5 billion. That’s nearly seven times more than Tesla's net income. JPMorgan had earnings per share of $19.75 in the last fiscal year.

Taking JPMorgan's share price of $268.00, the firm has a price-to-earnings ratio of 13.6.

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Why It's Important: Tesla would be worth $32.84 per share if it traded at the same P/E ratio of JPMorgan. Keep in mind that automotive stocks often have lower P/E. Ford Motor Company F trades at 11.5x earnings and General Motors Company GM trades at 7.8x earnings.

For Tesla, many investors and analysts believe that the future valuation of robotaxis, new models, AI, FSD and the Optimus Bot are not priced in. That means shareholders are likely paying more today based on the future valuation.

Tesla CEO Elon Musk has said that he believes Tesla could be worth more than several of the largest companies in the world combined if they are able to meet all their ambitious goals.

Ark Invest CEO Cathie Wood, a Tesla investor, told Benzinga last year that it should trade more like a high-growth tech stock than an automotive stock.

While it's well-known for its EVs, Tesla also operates in fields like solar, energy storage, AI, autonomous driving and robotics.

For this reason, Wood said that Tesla should trade like a technology stock and not like traditional automakers, something that analysts and Tesla bears can't grasp.

"That's why they're getting it wrong," Wood told Benzinga on “The Raz Report.”

Autonomous taxi platforms could be "the biggest AI project in the world," she said. "This is not an auto play. This is an autonomous taxi platform play with software-as-a-service like margins.”

JPMorgan would trade at $3,139.66 per share if it had the same P/E ratio of Tesla. Instead, the bank is a value stock. Its price-to-earnings ratio of 13.6x is similar to, or slightly lower than other large financial institutions.

When it comes to using P/E ratios and looking at growth versus value, Tesla could be overvalued and JPMorgan could be undervalued. Tesla could also be undervalued when looking at its P/E compared to other tech stocks and the future valuations of items not priced in. Time will tell if both companies can show that they should be worth more than their current stock prices.

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