Ferrari (RACE -0.97%) just reported financial results for the first quarter. They were positive as revenue and adjusted diluted earnings per share rose 11% and 20%, respectively, compared to the year-ago period. But some investors might have been disappointed by the fact that management maintained its full-year outlook.

This unstoppable automotive stock has soared 188% just in the past five years, while the S&P 500 is up 82% during that time. However, the shares fell 6% following the latest announcement. Should you buy the dip on Ferrari? Don't make a decision until you know these three things first.

Not a typical car company

Of course, investors understand that Ferrari sells vehicles. It procures raw materials, hires a team of designers and engineers, and has a factory where its products are built. Then it sells these cars all over the world. Sounds boring, right?

Ferrari stands out because the goal is not to sell as many vehicles as possible. The top priority is to maintain the brand's image, one that exudes status and exclusivity. This mimics a luxury fashion house more than an auto manufacturer.

In Q1, Ferrari only sold 3,560 units. That figure has climbed steadily over time, but it remains tiny when you consider that 65 million passenger vehicles were sold globally in 2023. The strategy that founder Enzo Ferrari instituted of always selling one less car than the market demands has created a business that benefits from tremendous pricing power.

Ferrari's gross margin has averaged a ridiculous 50% in the past five years. Compare that to mass-market automaker Ford Motor (average five-year gross margin of 9%), or even high-end electric vehicle maker Tesla (21%). Ferrari is clearly playing its own game.

Impressive financial performance

Look at Ferrari's financials, and they run laps around the competition. Whereas traditional car makers experience painful cyclicality, as changes in interest rates and economic growth dictate sales and demand trends, Ferrari can largely avoid this exposure.

Just think about the demographic that can afford these six- and seven-figure vehicles. They are the wealthiest people in the world. When economic times get tough, they still have the capacity and willingness to buy what they view as collector's items. It helps that Ferraris hold their value over time. Again, limited product helps in this regard.

Revenue and earnings have historically climbed at healthy rates. And the good times are set to continue. CEO Benedetto Vigna highlighted that Ferrari's order book is strong, "with almost all models substantially sold-out." That's a truly incredible development that demonstrates just how in demand these vehicles are. And it gives the leadership team valuable sales visibility well into the future.

High expectations

Ferrari has worked out to be an amazing investment for its shareholders over the years. As the business has continued to post strong fundamental performance, the market's appreciation has only climbed.

This is clear when looking at the valuation. The stock trades at a price-to-earnings (P/E) ratio of 52. That's more than double the multiple that the S&P 500 currently carries. On the one hand, investors can make the easy argument that this valuation is justified. Ferrari is a special business with a powerful brand, impressive financials, and growth potential.

But on the other hand, it's also safe to say that shares are extremely expensive. The stock's average P/E ratio historically is 39, and the lowest multiple it ever traded for was 20. Expectations and optimism are high for a company that keeps putting up good numbers.

Investors looking to take Ferrari for a spin should add the stock to their watch lists for now.