The value of any company is the rate-of-return that will be generated from all future cash flows. I.e. if someone bought Tesla on Friday and held the stock all the way in the future until Tesla went bankrupt , then you could back compute the rate of return on Friday’s investment from all future dividends. If that rate of return is equal to the SP500 rate of return over that same period, then Friday’s share price reflected a very fair market value for Tesla. The problem is estimating what Tesla’s future cash flows will be. Using an inherently stupid backward looking metric like P/E ratio works pretty well for stable companies with average growth as a shortcut to predicting the rate of return. But that metric becomes worse the more a company’s growth deviates from the average. E.g. Company A & B both have a P/E ratio of 20, same debt, same cash… But imagine you could forecast that Company A’s earnings would grow 110% this year, while company B’s earnings will grow 110%. Those investors who look forward would realize that one year in the future, if Company B’s share price stays the same, their P/E ratio will be a roughly half of Company A’s, so these wiser investors will be willing to pay up to almost 2X more for a share of Company B, just for that single year’s worth of growth alone. If Company B can do that for 5 years, then investors should be will to pay a P/E ratio approaching 640 (minus discounted value of the investment from 5 years back to today). Tesla just recently crossed into profitability. And their Operating Expenses do not need to grow nearly as quickly as revenue. This is called Operating leverage. That means that Tesla’s profit will grow even more than 100% this year. And Tesla’s demand, new factories, unprecedented growth, increasing prices, decreasing costs mean that unbelievable growth will continue for a lot of years. Even if competition executes perfectly, they can’t physically scale fast enough to dent Tesla’s growth. So if trying to project the future cash flows by understanding how critical, growth, operating leverage and ROIC is NOT fundamental, then the use of that word has no meaning. More