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What does a high P / E imply about growth ( advanced ) ? Now, you may think that the answer to the first question
What does a high PE imply about growth advanced
Now, you may think that the answer to the first question is all that is needed to determine what growth Tesla must produce, but it isn't. Remember, the market is also growing. So your answer above is how much Tesla must grow BEYOND what the market is growing.
So if we assume the market's annual earnings growth per year, how much does Tesla's growth have to be to justify its PE
Hint: To determine this, use your answer above in this equation: answer above market's annual growth rate in a decimal
Notes:
Enter your answer with three decimals. For instance, if your answer is enter
Important: make sure to round to three decimals the numbers you enter into the formula above.
This answer once again ignores time value of money and the fact that the market pays dividends and buys back shares which Tesla does not. Because of high future earnings are not worth as much as earnings today, the answer you note here underestimates how much Tesla really must grow to justify its high growth rate.
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