Taking an Innovative Road Trip with Google, Tesla & Goodyear

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Jump in my Tesla Motors (NASDAQ: TSLA) Model S, equipped with Goodyear (NASDAQ: GT) self-inflatable tires, and put on your Google (NASDAQ: GOOG) Glasses! We’re going on a road trip through Time Magazine’s “Best Inventions of 2012.”

Why? (1) It should be informative; (2) More importantly, you might be able to spot a promising stock investment -- either directly or by revving up your brainstorming gray matter.

An example of #2? Apple’s (NASDAQ: AAPL) iPhone was the overall winner in 2007. For every $1,000 invested in Apple stock during the week after the Friday it took home Time’s "Best Invention of the Year" crown, you’d now have between $2,490 and $2,840 (data to Feb. 5). And this is after Apple’s 35% drop from its high of $705 per share in September.

Time has changed its ranking system over the years. In 2007, it chose several winners in various product categories as well as an overall winner. For 2012, it chose 25 winners – and categorized them solely by product cost (or estimate) range.

Google Glass

<img src="/media/images/user_13269/googleglass_1_large.jpg" />


Source: Time Magazine

Google Glasses are a product developed by Google X Lab's "Google Glass" project. Consumers should be able to buy the glasses by 2014 for about $1,500, according to Time and other sources. Already have a pair? I won’t ask… Put ‘em on -- and pull up Time’s snippet without using a mobile device such as a smartphone or tablet:

Glass is, simply put, a computer built into the frame of a pair of glasses, and it’s the device that will make augmented reality part of our daily lives. With the half-inch (1.3 cm) display, which comes into focus when you look up and to the right, users will be able to take and share photos, video-chat, check appointments, and access maps and the Web.

I’d guess they’ll mainly be used for things people can already do on a mobile device, but will do with these because it's more convenient -- or just because they can. However, I can think of situations where a person’s hands aren't available where these would come in very handy. 

Ironically, while these have the potential to be major distractions if worn while driving (and you know they will be by some), another Google X Lab's project -- driverless vehicles -- will make driver distractions a non-issue if/when it comes to fruition.

Google as an investment?

It continues to look good. Google's recently announced Q4 results beat estimates. Revenue came in particularly strong: up 36% year-over-year, and 8% over the subsequent quarter. GAAP EPS was $8.62, up 4.9%, which was negatively affected by the discontinued operations associated with the company's Motorola business.

Some basic stats follow -- and, yes, Apple also looks good (great, actually) by these numbers (that's another story -- or article). Though Apple and Google compete to a large degree, keep in mind they also each contribute to the other's coffers. The Google or Apple (as an investment) question doesn't seem the right question. They both can be good investments -- at least for now.  

<table> <tbody> <tr> <td> <p><strong> </strong></p> </td> <td> <p><strong>Trailing P/E</strong></p> </td> <td> <p><strong>Forward P/E</strong></p> </td> <td> <p><strong>5-Yr PEG</strong></p> </td> <td> <p><strong>Profit Margin (ttm)</strong></p> </td> <td> <p><strong>ROE (ttm)</strong></p> </td> <td> <p><strong>Debt to Equity (mrq)</strong></p> </td> <td> <p><strong>FCF Yield (ttm)</strong></p> </td> </tr> <tr> <td> <p> Google</p> </td> <td> <p>23.8</p> </td> <td> <p>14.3</p> </td> <td> <p>1.2</p> </td> <td> <p>21.4%</p> </td> <td> <p>16.6%</p> </td> <td> <p>10%</p> </td> <td> <p>4.3%</p> </td> </tr> <tr> <td> <p> Apple</p> </td> <td> <p>9.0</p> </td> <td> <p>10.4</p> </td> <td> <p>0.52</p> </td> <td> <p>25.4%</p> </td> <td> <p>38.4%</p> </td> <td> <p>N/A</p> </td> <td> <p>5.0%</p> </td> </tr> </tbody> </table>

Source: Yahoo! Finance

Tesla Model S (on left)

 

<img src="/media/images/user_13269/tesla-model-s-elcetric-car-img_9_large.jpg" />

Source: Science of Revenue

It's hard to believe these are electric vehicles (EV), isn’t it? The Model S (on left) not only has a super-long range, it actually looks great. The Model S has a base price of $57,400, or $49,900 after the federal tax credit.

Stop ogling the dash (!) -- and use your Google Glasses to pull up Time’s ditty:

This electric four-door sedan has the lines of a Jaguar, the ability to zip for 265 miles (426 km) on one charge—that’s the equivalent of 89 m.p.g. (2.6 L/100 km)—and touchscreen controls for everything from GPS navigation to adjusting the suspension. Tesla is building a network of supercharger stations—six are open so far—so owners aren’t tethered to their home port.

This car has been racking up awards and rave reviews. It was named Motor Trend's prestigious "Car of the Year," and drove away with "Urban Green Vehicle of the Year" honors at the recent Detroit Auto Show.

For those not familiar with the company: Tesla was founded in 2003, introduced its first EV (the Roadster -- on right in pic, base price $109,000) in 2008, and went public in 2010. It’s solely involved in EVs, and is slated to begin production on a third vehicle, Model X, a cross-over, in 2014. One unique element of its business plan: it sells directly to consumers via the telephone, online and its own retail stores. Its retail stores are modeled on Apple’s and Starbucks’ concepts of an overall “experience.”

Tesla as an investment?

That depends upon one's risk-tolerance and investing style. The company and its vehicles are almost universally considered top-notch. The company is not profitable -- but that's common for new companies developing new technology, especially ones in capital-intensive industries. However, it did recently become cash flow positive for the first time.

If you believe EVs are here to stay this time around, as do I, and believe in Tesla’s ability to eventually turn a profit, then Tesla could put some zoom in your portfolio. Potential investors will have the most recent numbers to digest soon --Tesla announces Q4 results on Feb. 11.  

If you're not comfortable investing in a company unless it's profitable, Tesla isn't for you.

Some green lights (other than related to quality):

  • The early-mover -- if we’re talking about EVs with considerable range.
  • Low beta – The stock's beta is .41, meaning its share price is only about 40% as volatile as the overall market.

Some yellow lights (other than related to profitability):

  • Competition – All the major automakers are focusing on EVs, and some are also working on vehicles powered by other forms of alternative energy, such as fuel cells.
  • The short ratio is turbo-charged – it's been about 40% recently. 

Want to check under the stock's hood? The Motley Fool CAPS community and Wall Street analysts are roughly divided on this stock – check out the sentiments and bull and bear arguments here.

Goodyear Self-Inflatable Tires

 

<img src="/media/images/user_13269/selfinflatingtire_large.jpg" />
                                         

Source: Time Magazine

Drop your Google Glasses down again, and read what Time says about this product:

As soon as the pressure in these Goodyear tires (which don’t have an official retail price yet) gets too low, they know it. An internal pressure regulator opens to allow air to flow into a pumping tube, and as the wheel turns, the flattened part helps squeeze air from the tube through an inlet valve into the tire. Once the air pressure hits an optimal level, the regulator closes—all without the driver’s realizing anything was wrong.

The price on these is estimated to be about $200. While self-inflating tires might not be as exciting as Bond-like EVs or Jetsonian-like consumer gadgets, they'll make life a bit more convenient.

Goodyear as an investment? 

There's a fair deal of positive sentiment for Goodyear as a value play. Its 5-year PEG of .19 suggest it's a good buy -- but, remember, that's only if analysts' 5-year earnings projections are on target. The major negative -- its high debt load. That said, the current ratio looks OK, so there doesn't seem to be a short-term liquidity issue.

As with most cyclical companies, Goodyear's fortunes suffered during the Great Recession. However, Goodyear has a strong brand name and should benefit as auto sales improve. Goodyear announces Q4 results on Feb. 12 -- potential investors should keep an eye on not only revenue and earnings, but profit margins. Its profit margins over the trailing twelve months were a super-slim 1.1%. 

Cooper Tire's numbers are included for comparison sake. Cooper is a smaller company, with a market cap about half Goodyear's ($1.6 vs $3.2 billion).  

<table> <tbody> <tr> <td> </td> <td> <p><strong>Trailing P/E</strong></p> </td> <td> <p><strong>Forward P/E</strong></p> </td> <td> <p><strong>5-Yr PEG</strong></p> </td> <td> <p><strong>Operating Margin (ttm) </strong></p> </td> <td> <p><strong>Profit Margin (ttm)</strong></p> </td> <td> <p><strong>ROE (ttm)</strong></p> </td> <td> <p><strong>Debt to Equity (mrq)</strong></p> </td> <td> <p><strong>Current Ratio (mrq)</strong></p> </td> </tr> <tr> <td> <p>Goodyear</p> </td> <td> <p>16.6</p> </td> <td> <p>5.9</p> </td> <td> <p>0.19</p> </td> <td>4.8%</td> <td> <p>1.1%</p> </td> <td> <p>11.9%</p> </td> <td> <p>281%</p> </td> <td> <p>1.8</p> </td> </tr> <tr> <td> <p><strong>Cooper Tire</strong></p> </td> <td> <p> 4.5</p> </td> <td> <p>8.2</p> </td> <td> <p>1.26</p> </td> <td> <p>7.9%</p> </td> <td> <p> 8.5%</p> </td> <td> <p>52%</p> </td> <td> <p>44%</p> </td> <td> <p>2.1</p> </td> </tr> </tbody> </table>

Source: Yahoo! Finance 

This road trip is over for me, but you might want to motor on and check out Time's other 22 “Best Inventions of 2012.”




BAMcKenna has no position in any stocks mentioned. The Motley Fool recommends Google and Tesla Motors. The Motley Fool owns shares of Google and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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