As investors contemplate the value of Tesla Inc (TSLA, Financial), a glance at its recent performance shows a daily gain of 1.89% and an 8.59% increase over the past three months. With an Earnings Per Share (EPS) of 3.11, the question arises: is Tesla significantly undervalued? This article delves into a valuation analysis of Tesla, inviting readers to explore the financial intricacies that could influence their investment decisions.
Company Introduction
Tesla Inc (TSLA, Financial), a trailblazer in the sustainable energy and electric vehicle industry, boasts a rich history and a diverse product lineup that includes luxury sedans, crossover SUVs, and solar energy solutions. With a current stock price of $261.47 and a market cap of $831.20 billion, Tesla's valuation stands in stark contrast to its GF Value of $453.53, indicating a significant undervaluation. This sets the stage for a deeper examination of the company's intrinsic value, skillfully blending financial analysis with key business insights.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance projections. When a stock's price significantly deviates from the GF Value Line, it suggests overvaluation or undervaluation, potentially impacting future returns. Tesla's current price, when compared to its GF Value, suggests that the stock is significantly undervalued, and thus, may offer a higher long-term return relative to its business growth.
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Financial Strength
Assessing a company's financial strength is crucial before investing. Companies with robust financial health pose a lower risk of permanent loss. Tesla's cash-to-debt ratio of 3.19 outperforms 77.72% of its peers in the Vehicles & Parts industry, reflecting strong financial stability with a rating of 9 out of 10.
Profitability and Growth
Investing in profitable companies, particularly those with long-term consistency, generally carries less risk. Tesla, with a 3-year track record of profitability, an impressive operating margin of 11.22%, and a profitability rank of 4 out of 10, demonstrates potential despite its modest profit margins. Furthermore, Tesla's growth, which is pivotal to valuation, has been remarkable, with a 3-year average revenue growth rate that surpasses 93.69% of the 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 value creation. Tesla's ROIC of 19.82 is higher than its WACC of 15.29, indicating effective capital allocation and value generation for shareholders.
Conclusion
In summary, Tesla (TSLA, Financial) appears to be significantly undervalued, presenting a strong financial condition but modest profitability. The company's growth trajectory outshines much of its competition within the Vehicles & Parts industry. For a more in-depth look at Tesla's financials, 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.
