TSLA Stock -- What's In It For Investors?

We've been asking ourselves recently if the market has placed a fair valuation on Tesla. Let's dive into some of the fundamental values of this large-cap Consumer Discretionary company to determine if there might be an opportunity here for value-minded investors.

Tesla Has Elevated P/B and P/E Ratios:

Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Tesla has a trailing 12 month P/E ratio of 69.7 and a P/B ratio of 15.01.

Tesla's PEG ratio is 9.41, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

The Company Has a Positive Net Current Asset Value:

2018-02-23 2019-02-19 2020-04-28 2021-02-08 2022-02-07 2023-01-31
Revenue (MM) $11,759 $21,461 $24,578 $31,536 $53,823 $81,462
Gross Margins 19.0% 19.0% 17.0% 21.0% 25.0% 26.0%
Operating Margins -14% -1% 0% 6% 12% 17%
Net Margins -17.0% -5.0% -4.0% 2.0% 10.0% 15.0%
Net Income (MM) -$1,961 -$976 -$862 $721 $5,519 $12,556
Net Interest Expense (MM) -$452 -$639 -$641 -$718 -$315 $106
Depreciation & Amort. (MM) -$1,636 -$1,901 -$2,154 -$2,322 -$2,911 -$3,747
Earnings Per Share -$0.79 -$0.38 -$0.32 $0.22 $1.64 $3.71
EPS Growth n/a 51.9% 15.79% 168.75% 645.45% 126.22%
Diluted Shares (MM) 2,486 2,558 2,655 3,249 3,369 3,387
Free Cash Flow (MM) $4,021 $4,417 $3,842 $9,185 $18,011 $21,896
Capital Expenditures (MM) -$4,081 -$2,319 -$1,437 -$3,242 -$6,514 -$7,172
Net Current Assets (MM) -$16,452 -$15,120 -$14,096 -$1,701 -$3,448 $4,477
Long Term Debt (MM) $9,418 $9,404 $11,634 $9,556 $5,245 $1,597
Net Debt / EBITDA 1773.54 5.03 3.2 -1.78 -1.16 -1.09

Tesla has exceptional EPS growth, a pattern of improving cash flows, and wider gross margins than its peer group. However, the firm suffers from weak operating margins with a positive growth rate and a highly leveraged balance sheet. Finally, we note that Tesla has weak revenue growth and a flat capital expenditure trend and just enough current assets to cover current liabilities.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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