Though Tesla's (NASDAQ:TSLA) stock has declined about 6% over the past 12 months, its business has gone in a significantly different direction. The electric-car company has swung from reporting significant losses to becoming meaningfully profitable. In addition, Tesla's vehicle sales and total revenue have soared. As a result, this strong momentum has distanced the company from competition and strengthened its position as a leader in the electric-vehicle market.

While Tesla stock may not look like an attractive investment on the surface, a closer look at the company's recent execution and an understanding of its key catalysts suggest Wall Street may be underestimating the value of Tesla's early lead in this fast-growing market.

Manufacturing execution

There have been times when Tesla's ability to ramp up production of its vehicles has looked like the automaker's biggest weakness. Indeed, as recently as the fourth quarter of 2017, it was running six months behind critical production targets for its newest and most important vehicle yet: the Model 3. The company had initially aimed to wrap up 2017 producing 5,000 Model 3 units per week. Instead, it produced just 2,425 Model 3 units during the entire fourth quarter of 2017.

But when you zoom out and look at Tesla's production ramp over a larger time horizon, its progress is extraordinary. In the fourth quarter of 2013, it produced about 6,000 vehicles. By the fourth quarter of 2018, the automaker was making over 6,000 vehicles a week, or 86,555 vehicles during the quarter.

Check out the latest Tesla earnings call transcript.

Tesla's growing production is just as staggering when viewed over the last two years. In 2018, soaring Model 3 production helped Tesla deliver over 245,000 vehicles -- up from about 103,000 deliveries in 2017.

Tesla's "production hell" during the beginning of its Model 3's production ramp-up made plenty of headlines. But production hell is over -- and Tesla's ability to grow production so steeply and exit production hell completely is evidence of its manufacturing prowess.

Tesla is profitable

The automotive business is extremely capital-intensive. It's not surprising, therefore, that Tesla has been mostly unprofitable since it went public in 2010. What is surprising, however, is that the automaker has now reported two quarters in a row of meaningful profits.

In Tesla's third quarter of 2018, the company reported net income of $312 million and free cash flow (cash from operations less capital expenditures) of $881 million. Fourth-quarter net income and free cash flow was $139 million ($193 million when adding back in a $54 million non-cash charge during the quarter) and $910 million, respectively.

Importantly, Tesla expects to remain profitable, with the exception of the possibility of a small loss in its first quarter of 2019. For the following three quarters of the year, management expects the company to be profitable.

Notably, Tesla now trades at just 14.5 times an annualized run rate of free cash flow based on the automaker's free cash flow in its last two quarters. This is an attractive valuation for a company poised to grow deliveries by about 55% this year thanks to higher Model 3 production rates achieved at the end of last year.

Big catalysts

What's more, Tesla has some major growth opportunities ahead of it.

First, there's the upside in Model 3 deliveries that can come from a global expansion. Model 3 deliveries in 2018 were limited to North America. The vehicle's recent expansion to Europe and China could help its quarterly unit sales rise even more throughout 2019, extending the Model 3's leadership position beyond the United States. If the Model 3's ability to become the best-selling luxury car (including SUVs) in the U.S. in 2018 is any indication of how well the vehicle will resonate with customers in Europe and China, the vehicle will be a hot seller in these markets, too.

Second, Tesla can grow sales by introducing a lower-priced variant of its Model 3. For now, the Model 3 starts at $42,900. But Tesla is planning to bring to market a $35,000 version of the vehicle later this year. Of course, Tesla will need to benefit from manufacturing improvements and greater economies of scale over the next four to six months in order to pull this off. But these meaningful price reductions recently suggest it's making quick progress toward this goal.

Looking beyond the Model 3, there's also room for Tesla to grow sales significantly by introducing new models. The company has yet to introduce a more affordable SUV. Its current SUV, Model X, starts at a pricey $88,000. Unsurprisingly, Tesla has a vehicle in the works to tap into a large market for more affordable SUVs. It plans to begin producing its Model Y early next year, with higher-volume volume production by the end of 2020.

Of course, the cream of the crop would undoubtedly be a fully electric pickup truck. Ford F-series truck sales in the U.S. alone amount to nearly 1 million units per year. Tesla has its eyes on this market, too. Indeed, the company has said it may even show off the vehicle this summer. Production of the truck, however, isn't likely to begin any earlier than 2021.

Big risks

Buying shares of a company in a capital-intensive, highly competitive market that is seeing rapid change comes with some significant risks.

Chief among these risks is demand. Current sales trends paint a rosy picture for the potential demand for Tesla's vehicles. The Model S and X continue to outsell all comparably priced vehicles in most key markets, and the Model 3's ability to quickly become the best-selling luxury car in the U.S. vouches for its strong potential globally. But if demand fails to live up to Tesla's growing production, the company could catch itself between a rock and a hard place -- not a good place to be in a capital-intensive industry.

Rising competition is also a concern. No electric vehicle yet has put pressure on Tesla's sales. In addition, most high-volume fully electric vehicle programs from other automakers are a few years out. But it's always possible that new vehicles from competitors could eventually steal market share from Tesla. On the other hand, of course, the market for compelling fully electric vehicles could grow fast enough that it becomes a rising tide that lifts all boats.

Considering these risks, investors may want to limit the size of a position in Tesla stock to a small portion of their portfolio. Even a small position, however, could be rewarding over the long haul if Tesla continues to execute and keeps building vehicles customers love. Better yet, if the electric-vehicle market as a whole takes off, Tesla is positioned better than any automaker in the world to benefit.