Tesla Motors, Inc. Stock Fundamental Analysis
Name: Tesla Motors, Inc.
Symbol: NASDAQ: TSLA
Sector: Consumer Discretionary
Industry: Automobile Manufacturers
Tesla Motors, Inc. designs, develops, manufactures and sells electric vehicles and energy storage products. The Company produces and sells two electric vehicles: the Model S sedan and the Model X sport utility vehicle (SUV).
Stock price close at 16th November 2016: $183.93
Market Cap: 27.57B
52 Week Range : $141.05 – $269.34
PE Ratio (TTM): -29.09
Tesla Motors, Inc. (NASDAQ:TSLA) is an electric car manufacturer with products such as Model S, which we love and would buy without any hesitation. Great car with fantastic design and technology. But it is another thing to like a company and its products and to like or not the company’s stock. Having a thorough fundamental analysis on Tesla’s stock what can we point out as strengths and weaknesses?
We will perform stock fundamental analysis for 5 years, from 2011 to 2015 and also focus on latest quarters for 2016.Total revenues and gross profit have followed a huge increase. From $204 millions of revenues in 2011, Tesla earned 4046 millions in 2015.Gross profit followed an increase from $62 millions in 2011 to $ 924 millions in 2015. As Tesla invests in technology research and development expenses and selling general expenses have both increased significantly during this 5 years period. The net result is negative operating income for all 5 years, with a huge negative increase in year 2015 of -$714 millions compared to -$187 millions to 2014.Net income after taxes is negative for all 5 years, with year 2015 having the biggest negative number of the 5 years -$889 millions. The trend of diluted normalized EPS is negative also, no surprise here, following the same trend as net income. In 2015 the diluted normalized EPS was -$6.93, the lowest point for the 5 year period.
While cash and short term investments have been increasing from $280 millions to $1197 millions in 2015, what is alarming is the increase of total debt over the 5 years. It has increased from $280 millions in 2011 to $2,696 millions in 2015.Each year the total debt follows an increase compared to previous year. While total equity shows also a large increase over the 5 years from $224 millions in 2011 to $1084 millions in 2015.
Cash Flow Statement:
Here we have an interesting trend for cash flows from operating activities and cash flows from investing activities compared to cash flows from financing activities. Cash flows from financing activities have showed an increasing trend, as the company issued stocks and debt and the net result was an increase of cash but for the same period cash from operating and investing activities has been negative. And free cash flow has been negative for 4 out of the 5 years, with year 2015 being at -$2159 millions showing a negative increase of about 110% compared with year 2014.
As mentioned before the company has negative EPS for all 5 years, with year 2015 having the highest negative earnings per share of -$6.93 for the period. While gross profit margin is positive for all 5 years it has shown a diminishing trend and is currently at +22.82% for year 2015.Net profit margin is negative for all 5 years, showing a great improvement from year 2011, but for year 2015 it is at -21.96% almost doubled from last year. ROE is negative for all 5 years, again showing an improvement from base year 2011 but for year 2015 it is at -82.00% compared to -32.25% for year 2014 a very negative performance.
Both current ratio and quick ratio have showed a declining trend for our 5 year period. Current ratio for year 2015 is at 0.99, it was 1.95 at year 2011, while quick ratio for year 2015 is at 0.54, it was 1.69 at year 2011. Debt / Equity ratio is very alarming as it has been increased significantly during these 5 years. It was 1.2504 at year 2011, it was 2.488 for year 2015.
Relative value analysis with industry:
Tesla Motors, Inc. has negative profit margin, ROE and interest coverage ratios compared to the relevant ratios of the automobile manufacturers industry. The industry has all 3 positive ratios. The company has a negative P/E ratio, while the industry a P/E ratio of 9.48.The company has a price/tangible book value ratio of 10.29 compared to the 1.84 price/tangible book value ratio of the industry.
The expected EPS growth rate for next 3-5 years is about 30%.Tesla Motors, Inc. had a recent EPS surprise of 112.28% on 26th October 2016, the first in last 4 quarters showing positive EPS of $0.14 compared to expected EPS of – $1.14.
The stock has been in a downtrend and its recent price close of $183.93 on 16th November 2016 is below the daily moving averages of 50 and 200 days, which are currently at 198.75 and 212.48 respectively. Both moving averages show a declining trend. MACD is negative currently having a value of -4.746.Other indicators such as full stochastics for 14 days show an oversold condition being at 15.35.
We do not like the fact that Tesla has not showed profitability for last 5 years. It has a lot of debt which makes it a very risky stock. Until it shows a consistent profitability we cannot suggest to buy the stock. It seems extremely overvalued on a comparative value analysis with the industry it belongs. Unless fundamentals improve a lot and show not just once improvement but a long term improvement, our bias is to sell or go short the stock going with current declining trend.
Legal disclaimer and sources:
The author has not any current shares of the stock in his portfolio or intends to buy, sell any stocks of the company in the near future. This is an independent financial analysis with not any financial compensation from any source. Sources used are investools.com, zacks.com, stockcharts.com and yahoo finance.