Tesla has surpassed Toyota to become more valuable than the Japanese carmaker, but Tesla isn't actually worth more.

TIME. Toyota has been worth a lot for a long time. Forgetting about the critical difference between Toyota's value as a business and its stock-market value, the company has been a a tremendous store of value for decades. Tesla has been considered a similar store for much, much less time.

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EXECUTION. Toyota's profit margins are less than 10%, and given the state of the global auto market, it can't look forward to tremendous growth. Investors value Toyota based on its ability to execute year in and year out.

Tesla

GROWTH. Tesla's surging value is a big bet that a sustainable energy and transportation company could be highly profitable in the future. Toyota's investors also expect future profits, but in the context of a predictable, steady business.

VOLATILITY. As with any public company, Toyota's stock price moved up and down over the decades. But since the recovery from the financial crisis began, the carmaker has been stable — a sort of safe haven.

VOLATILITY, PART DEUX. Tesla has been anything but stable, stock-wise. A year ago, it was trading at around $400. Year-to-date, it's shot up above $1,200. It hasn't done anything more significant than sell more cars. So much of its speculative value is actually getting more expensive based on little more than achieving the basics.

INSTITUTIONAL OWNERSHIP. Tesla CEO Elon Musk owns over 20% of Tesla and never sells stock. Most of the rest of the company is owned by big, institutional investors, leaving retail investors to fight over the limited amount of what's left. This can create a significant supply-demand imbalance.

SHORT-SELLERS. Tesla has been a heavily shorted stock, for obvious reasons. Big rallies are often followed by big swoons. But when those rallies are on, some shorts have to throw in the towel, covering losing positions and driving the price even higher.

DELUSIONAL MOMENTUM. Tesla has become one of those "FOMO" stocks — it's up almost 200% year-to-date, so shame on naysayers! But invariably, speculation outruns fundamentals. Even if Tesla is profitable through all of 2020, it can only make so much money selling about 400,000 vehicles.

REVENUE. Tesla has done a good job of growing revenue over the past few years, as it has increased production and sales. But Toyota has been bringing in over $200 billion annually for 20 years.

SEGMENTATION. Tesla needs to grow into market segments that Toyota is already in and has been in for decades. Tesla also needs to displace gas-powered vehicles from those segments. This is going to be extremely expensive to do.

PRE-EXISTING INVESTMENT. Toyota built itself up a post-war colossus — at post-war prices. Inflation has greatly increased the value of the investment, by lowering it as an operational cost over time. And making it costly for Tesla to expand, given that it has to pay 2020 prices to grow.

INNOVATION. Tesla is a technical innovator, while Toyota is a process innovator. The Toyota Production System revolutionized manufacturing in the 1980s. Tesla's type of innovation tends to be overvalued in the short term and undervalued in the long term.

INDUSTRIAL POLICY. Toyota benefited from Japan's centrally organized approach to developing its post-war economy. Tesla has benefited from entrepreneurship, but has begun to lose US support for electric vehicles, in the form of tax credits that are now expiring.

ENTERPRISE VALUE. Toyota's is more than $300 billion, while Tesla's is less than $200 billion.

Reuters/Darren Staples

DEBT. Toyota has a little over $90 billion in total debt, while Tesla has $13 billion. For Tesla, that isn't bad, and the cash-to-debt ratios are similar (Toyota has $54 billion on hand, while Tesla has $8.5 billion). But Toyota's is designed for long-term management, while Tesla's has been packed on at a time when it's still trying to be steadily profitable.

THE GREAT MAN. Tesla is synonymous with CEO Elon Musk and his vision of a sustainable-energy company. If he left tomorrow, the stock price would collapse. Akio Toyoda is the president of Toyota — and the grandson of the founder — but his retirement would affect the company's value little, if at all.

EXTERNAL COSTS. Tesla is building an electric-car ecosystem and has invested billions in a global fast-charging infrastructure. Toyota's value was built on a gas-fueling system that cost it effectively nothing.

LEAPS. All of Tesla's leaps forward have involved fundamentals, such as building and selling more cars. Toyota's leaps have been legitimately game-changing, such as the introduction of the Prius hybrid in the early 2000s.

PEERS. Tesla has surpassed every other US automaker in value — Ford, General Motors, and FCA — but those carmakers, like Toyota, have been very valuable for many, many years.

Andy Kiersz/Business Insider

ADDING IT ALL UP. The bottom line is that Toyota has been extremely valuable, financially and as an enterprise, for decades. Tesla has been exceptionally valuable for less than a year.