Amidst a volatile market, Tesla Inc (TSLA, Financial) has experienced a daily gain of 4.22%, despite a 3-month downturn of -7.77%. With an Earnings Per Share (EPS) of 3.11, investors are keen to understand whether Tesla stands as a significantly undervalued entity in the market. This article delves into the valuation analysis of Tesla, providing insights into whether the current market price reflects the company's intrinsic value.
Company Introduction
Tesla Inc (TSLA, Financial), a trailblazer in sustainable energy and electric mobility, has cemented its position as a key player in the transition towards a greener future. Founded in 2003 and headquartered in Palo Alto, California, Tesla not only manufactures electric vehicles but also sells solar panels, solar roofs, and batteries for energy generation and storage. With a diverse vehicle range from luxury sedans to crossover SUVs, and plans to expand into more affordable vehicle segments, Tesla's global deliveries surpassed 1.3 million vehicles in 2022. Presently, Tesla's stock price stands at $223.71, with a market cap of $711.20 billion, raising the question of how this compares to its GF Value—a measure of fair value at $449.58.
Summarize GF Value
The GF Value is a unique valuation metric that estimates the intrinsic value of a stock by considering its historical trading multiples, an adjustment factor for past performance, and future business prospects. Tesla (TSLA, Financial) appears to be significantly undervalued according to our GF Value calculation. This assessment suggests that the long-term return on Tesla's stock could potentially outpace its business growth, given its current market positioning.
Financial Strength
Investing in companies with robust financial strength minimizes the risk of capital loss. Tesla's financial health, indicated by a cash-to-debt ratio of 3.19, surpasses 76.56% of its peers in the Vehicles & Parts industry. This financial prowess is further reinforced by a strong GuruFocus financial strength rank of 9 out of 10.
Profitability and Growth
Profitable companies, especially those with a history of consistent performance, present less investment risk. Tesla, with a decade of profitability, reported revenues of $95.90 billion and an operating margin of 11.22%, ranking higher than 81.15% of its industry counterparts. Despite this, Tesla's profitability rank is a modest 4 out of 10, reflecting areas for potential improvement. Growth, a critical valuation component, has been impressive for Tesla, with a 3-year average revenue growth rate outperforming 93.64% of industry competitors.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) offers insights into its value creation efficiency. Tesla's ROIC of 19.82 exceeds its WACC of 17.52, indicating effective capital utilization and shareholder value generation.
Conclusion
Conclusively, Tesla (TSLA, Financial) presents a compelling case as a significantly undervalued stock. The company boasts a solid financial foundation, though its profitability leaves room for growth. With a growth trajectory that eclipses many within the Vehicles & Parts industry, Tesla's future prospects appear promising. For an in-depth look at Tesla's financial history, interested parties can explore its 30-Year Financials here.
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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.
