Tesla Motors Inc (NASDAQ:TSLA) has had an incredible year, posting its first quarterly profits and announcing plans to build capacity in the U.S. while expanding aggressively into Europe. CEO Elon Musk has proven that the company is not just viable, it’s poised for strong growth. But he’s also made multiple statements warning investors that his company’s stock price is “more than we have any right to deserve,” reports Ben Rooney for CNN Money.

Tesla Motors

Tesla’s rally flattened out in October

Price targets for Tesla Motors Inc (NASDAQ:TSLA) range from $45 to $240 while the stock price is around $175 after rising 400% so far this year, and the company’s price-to-earnings multiple is an astounding 100, compared to 15x for General Motors Company (NYSE:GM) and 9x for Ford Motor Company (NYSE:F). Tesla’s rally flattened out in October, but at least some of that was due to value investors taking their profits and looking for something undervalued, which Tesla Motors Inc (NASDAQ:TSLA) certainly isn’t even if it can justify its current price.

P/E ratios may not be the best way to analyze a company that went from an EPS of minus $0.92 this time last year to an expected $0.11 this year. Ideally you’d like to smooth things out by looking at the cyclically adjusted P/E, but in this case it isn’t possible. Instead, investors have to try to figure out how quickly Tesla Motors Inc (NASDAQ:TSLA) can realistically expand capacity and lower prices so that electric cars become affordable. Even in a recovering economy, most people can’t shell out $70,000 for a new car. Different assumptions about how quickly Tesla can grow explain the almost total lack of consensus on the company’s stock price.

The third quarter earnings call

The third quarter earnings call is just around the corner, and hopefully someone will press Musk on why he felt the need to caution investors. Even if the company has good news to report, it may be that it would like to see the share price come down gradually so that it doesn’t fall off a cliff when unrealistic expectations meet the realities of a company that is doing well, but still can’t perform miracles. If Musk, who’s not exactly known for thinking small, believes that the current valuation is too high then bulls should seriously rethink their stance.