How to Invest in SpaceX Stock Before the Next Big Move

Space Exploration Technologies (NASDAQ: SPCX) stock is a falling star, and by some accounts, a broken IPO.

Elon Musk's famous space company went public at an official IPO price of $135 on June 12, but the first price at which most investors could buy it was $150, where the shares opened on that first day. The stock proceeded to take its investors on a rollercoaster ride over the next month, climbing as high as $225 intraday on its third day as a public company before falling, then recovering, and plunging once again.

On Friday, however, SpaceX stock closed at $145.30 -- below its opening price on its IPO day.

So what does this mean for investors?

Image source: Getty Images.

Once more, with feeling

SpaceX stock has come full circle, returning one month after its IPO to almost exactly where it began -- and there are two ways to look at this. From one perspective, investors who failed to buy SpaceX before its big move to $225 now have a chance to erase that mistake and get in on the ground floor for SpaceX's second world tour.

That's one way of looking at it.

But then there's the whole broken IPO thing to consider. Much like an object in motion tends to stay in motion, a stock with positive momentum tends to keep going up -- except that SpaceX isn't going up anymore. It's lost its momentum and declined on more days than it rose last week.

And this suggests investors may be starting to value SpaceX on its fundamentals.

How to value SpaceX on the fundamentals

How does that work? Ordinarily, an investor might take SpaceX's price-to-earnings ratio and compare it to analysts' projected growth rate to calculate a PEG ratio on SpaceX stock. A PEG of 1 or less would mean SpaceX stock is fairly valued, a ratio of up to 2 would suggest it's optimistically valued, and a ratio of more than 2 would suggest it's pretty heavily overvalued.

The problem is that SpaceX has no trailing earnings, so it has no price-to-earnings ratio. That makes it kind of hard to calculate a PEG ratio on SpaceX.

Analysts polled by S&P Global Market Intelligence do estimate that SpaceX will earn a profit -- $0.67 per share -- next year. They further estimate this profit will more than double every year over the next five years, approaching $26 per share in 2032. If they're right about that, then a P/E ratio of 100 or more, applied to next year's earnings, could still make SpaceX stock cheap.

Unfortunately, even taking next year's $0.67 estimate as a given, at nearly $150 per share, SpaceX's forward P/E ratio is currently 217. From where I sit, this means that SpaceX stock -- even after returning to its IPO day price -- remains overvalued.

And SpaceX stock still has further to fall.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.