Shares of Tesla (TSLA 0.79%) have cratered this month, falling more than 29% as of market close on Dec. 20. This decline adds to an already brutal year for the stock, bringing Tesla shares' total year-to-date return to a loss of more than 60%. Ouch.

This begs the question: Has the stock become oversold, creating a buying opportunity for investors?

Let's take a look.

Business momentum

While the electric car maker's stock has been slammed this year, the underlying business is doing quite well. Tesla's third-quarter vehicle deliveries, for instance, rose 42% year over year. Growth was impressive sequentially, too; Tesla's record third-quarter deliveries of 343,830 were up from deliveries of 254,695 in the second quarter. 

What about demand for its vehicles? Demand for vehicles that will be shipped in the final quarter of the year is "excellent," according to comments from Tesla CEO Elon Musk in the company's fourth-quarter earnings call. Indeed, demand is trending so well that Musk said the company expects to "sell every car that we make for as far in the future as we can see."

The company's vehicle production is also going well, with Tesla management saying in the company's third-quarter earnings call that it achieved a production volume of 2,000 cars per week at its new factory in Germany. Its new factory in Texas should hit this same milestone soon, management added. Meanwhile, production at the company's factory in Fremont, California hit record levels during the period.

Finally, the company is doing well, too. Free cash flow was $3.3 billion during Q3, up 148% year over year. Bolstering its balance sheet is $21.1 billion of cash and marketable securities, up $2.2 billion sequentially.

Valuation

With momentum like this, investors should expect Tesla stock to look cheap -- and it doesn't (at least at first glance). Shares trade at about 42 times earnings. This premium prices in significant earnings growth going forward.

But the premium is arguably reasonable, if not too low, relative to management's long-term growth expectations and considering two major catalysts the company has in the works for 2023 and beyond. Tesla's long-term view for its business, which it lays out in the outlook section of its quarterly letters to shareholders, is that the company can grow vehicle deliveries at an average rate of about 50% annually over "a multi-year horizon..." And based on the company's execution in recent years, this may be possible.

Strong growth next year also seems likely when investors consider two big catalysts for the business: The expected launch of Tesla's Cybertruck next year, and the company's explosive growth in its energy storage business.

Is it time to buy?

Tesla stock's valuation is starting to look attractive in the context of the business's underlying momentum. While it's always possible that growth doesn't pan out as expected (particularly in the near term as macroeconomic uncertainty potentially leads to some consumers delaying vehicle purchases), the company's recent growth and its exciting product pipeline make a good case for the stock.

Sure, there are always risks to owning the notoriously volatile stock, but it may make sense to make Tesla shares a small percentage of your portfolio at this price.