We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Since going public in 2010, Tesla (TSLA - Free Report) has been a true market leader. Over that period, the stock is up a staggering 13,000% versus just 200% in the S&P 500 Index during the same time frame, catapulting CEO Elon Musk to be the wealthiest human on Earth.
Image Source: Zacks Investment Research
Tesla’s undeniable success can provide investors with a valuable blueprint to help separate market leaders from laggards. Below we will identify 5 ways to differentiate between the two, including:
1. Explosive Growth: Tesla has produced annual earnings per share (EPS) growth every year over the past five years. Contrast that with competitors in the EV space or the traditional automaker space (trying to break into the EV industry), and you will not find the same growth. For example, competitors like Ford Motor (F) and Nio Inc (NIO - Free Report) have seen annual earnings per share oscillate back and forth over the same period. Other EV industry peers, such as Fisker Inc , Rivian (RIVN - Free Report) , and Lucid Group (LCID - Free Report) , have yet to post a profit as a public company.
Image Source: Zacks Investment Research
2. Brand Recognition:When you think of search, you likely think of Alphabet (GOOGL - Free Report) . When you think of smartphones, you think of Apple’s (AAPL - Free Report) iPhone. EVs are synonymous with Tesla. The recognizable brands often become the strongest performers in the long run.
3. Innovation:Blockbuster Video is no longer in business because of a lack of innovation. On the contrary, Netflix (NFLX - Free Report) , which was just a tiny company in the beginning, grew in a “hockey stick” like fashion due to innovating and birthing the streaming business. When you want to find a winning company, find a visionary CEO. Think Elon Musk, Steve Jobs, or Reed Hastings.
4. Financial Efficiency:In the end, it’s not about the revenue you can produce, but rather, the bottom line. For example, Tesla has a return on equity (ROE) of 38%, while the automotive industry has a negative ROE as a whole. In fact, the only automaker that compares to Tesla favorably is in a different segment (supercars). Ferrari (RACE - Free Report) has an ROE of 41% and has been a top performer over the past few years.
5. Price & Price Action:Like most things in life, you get what you pay for on Wall Street. Leading growth stocks tend to have higher valuations than laggards. This is because investors are willing to pay a higher premium for growth. Leading stocks also tend to outperform on a relative basis. Said another way, the price action in the market will show you the way.
Conclusion:
Leading companies tend to trade at higher valuations than laggards, reflecting their strong fundamentals and growth prospects. Investors who stick with leading stocks are more likely to benefit from capital appreciation over the long term.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Ways to Differentiate Leaders & Laggards
Stick with the Leaders
Since going public in 2010, Tesla (TSLA - Free Report) has been a true market leader. Over that period, the stock is up a staggering 13,000% versus just 200% in the S&P 500 Index during the same time frame, catapulting CEO Elon Musk to be the wealthiest human on Earth.
Image Source: Zacks Investment Research
Tesla’s undeniable success can provide investors with a valuable blueprint to help separate market leaders from laggards. Below we will identify 5 ways to differentiate between the two, including:
1. Explosive Growth: Tesla has produced annual earnings per share (EPS) growth every year over the past five years. Contrast that with competitors in the EV space or the traditional automaker space (trying to break into the EV industry), and you will not find the same growth. For example, competitors like Ford Motor (F) and Nio Inc (NIO - Free Report) have seen annual earnings per share oscillate back and forth over the same period. Other EV industry peers, such as Fisker Inc , Rivian (RIVN - Free Report) , and Lucid Group (LCID - Free Report) , have yet to post a profit as a public company.
Image Source: Zacks Investment Research
2. Brand Recognition:When you think of search, you likely think of Alphabet (GOOGL - Free Report) . When you think of smartphones, you think of Apple’s (AAPL - Free Report) iPhone. EVs are synonymous with Tesla. The recognizable brands often become the strongest performers in the long run.
3. Innovation:Blockbuster Video is no longer in business because of a lack of innovation. On the contrary, Netflix (NFLX - Free Report) , which was just a tiny company in the beginning, grew in a “hockey stick” like fashion due to innovating and birthing the streaming business. When you want to find a winning company, find a visionary CEO. Think Elon Musk, Steve Jobs, or Reed Hastings.
4. Financial Efficiency:In the end, it’s not about the revenue you can produce, but rather, the bottom line. For example, Tesla has a return on equity (ROE) of 38%, while the automotive industry has a negative ROE as a whole. In fact, the only automaker that compares to Tesla favorably is in a different segment (supercars). Ferrari (RACE - Free Report) has an ROE of 41% and has been a top performer over the past few years.
5. Price & Price Action:Like most things in life, you get what you pay for on Wall Street. Leading growth stocks tend to have higher valuations than laggards. This is because investors are willing to pay a higher premium for growth. Leading stocks also tend to outperform on a relative basis. Said another way, the price action in the market will show you the way.
Conclusion:
Leading companies tend to trade at higher valuations than laggards, reflecting their strong fundamentals and growth prospects. Investors who stick with leading stocks are more likely to benefit from capital appreciation over the long term.