NEW YORK (TheStreet) -- NYU Stern Business School Finance Professor Aswath Damodaran appeared on CNBC's "Closing Bell" on Tuesday afternoon to discuss how much weight investors should give to cash burn at companies like Tesla Motors (TSLA) .
"Cash is 'king' eventually. But if you make that the centerpiece for investing, you're never gong to invest in a young-growth company," Damodaran said.
Investors that complain about a young-growth company with cash burn are like parents that have kids and then complain when they're teens who are immature, he said.
"It's the nature of the beast," he added.
Some investors are particularly cautious about the cash burn at electric-car company Telsa as it builds a new battery factory and boosts car production, CNBC's Michael Santoli pointed out.
When asked how long investors should wait to see returns with companies like Tesla, Damodaran said, "It depends on how big the dream is."
"The problem with a company like Tesla is CEO Elon Musk every year expands his dream so its almost like he's moving the goal post, which is difficult for investors because you've got to readjust," he explained.
Right now, the automotive part of the company looks like it's "leading into positive territory," while the other part that acquired renewable energy company SolarCity (SCTY) looks like it's not going to pay off, he said.
In order to judge whether a company is burning through cash intelligently, Damodaran says investors have to make a judgement on the company's management team and on "what the company will look like if that company makes it."
You have to be an optimist, he concluded, because if you "avoid companies just because of cash burn, you're taking big segments of the market out of your portfolio."
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
TheStreet Ratings team rates Tesla as a Sell with a ratings score of D+. This is driven by some concerns, which the team believes should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks the team covers.
You can view the full analysis from the report here: TSLA