Tesla Inc (TSLA, Financial) has recently experienced a daily loss of 5.46% and a 3-month decline of 13.21%, raising questions about its valuation. With an Earnings Per Share (EPS) of 3.11, investors are keen to understand whether Tesla's current market price reflects its true value. This analysis aims to explore whether Tesla (TSLA) is significantly undervalued and what that implies for potential investors.
The journey to determine Tesla's fair market value begins with a thorough evaluation of its business operations, financial performance, and growth prospects. By comparing the current stock price with the GF Value, we aim to provide a clear picture of Tesla's intrinsic value. Read on for an in-depth analysis that could inform your investment decisions.
Company Introduction
Founded in 2003 and headquartered in Palo Alto, California, Tesla is a pioneer in the sustainable energy and electric vehicle industries. With a diverse product lineup that includes luxury and midsize sedans, crossover SUVs, and plans for more affordable vehicles and large transport solutions, Tesla is at the forefront of the transition to electric mobility. In 2022, Tesla achieved over 1.3 million global vehicle deliveries. Despite a current stock price of $209.98 and a market cap of $667.50 billion, Tesla's GF Value suggests that the stock may be significantly undervalued.
Summarize GF Value
The GF Value is a proprietary measure that assesses the intrinsic value of a stock, taking into account historical trading multiples, an adjustment factor based on the company's past performance, and future business projections. When a stock's price is significantly below the GF Value Line, it suggests that the stock may offer a higher future return. Tesla (TSLA, Financial)'s current price position indicates that the stock is significantly undervalued, hinting at a potentially higher long-term return than its business growth alone might suggest.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Tesla's cash-to-debt ratio stands at 3.19, ranking it above 76.86% of peers in the Vehicles & Parts industry. This strong balance sheet earns Tesla a financial strength rating of 9 out of 10 from GuruFocus.
Profitability and Growth
Consistent profitability is less risky for investors and typically indicates a more favorable investment opportunity. Tesla has been profitable for 3 years over the past decade, with a 12-month revenue of $95.90 billion and an Earnings Per Share (EPS) of $3.11. Its operating margin of 11.22% ranks well within its industry, although its overall profitability score is 4 out of 10, suggesting room for improvement.
Regarding growth, Tesla's 3-year average annual revenue growth rate is 36.4%, outperforming 93.64% of its industry peers. Its EBITDA growth rate over the same period is an impressive 83.9%, placing it higher than 97.06% of competitors in the Vehicles & Parts industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability and value creation. Tesla's ROIC of 19.82 is higher than its WACC of 17.37, indicating that the company is generating value for its shareholders.
Conclusion
In conclusion, Tesla Inc (TSLA, Financial) appears to be significantly undervalued based on its GF Value. The company boasts a strong financial condition and has demonstrated remarkable growth, although its profitability could be improved. For more detailed insights, Tesla's 30-Year Financials are available for review.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
