Tesla Inc (TSLA) Extended Graph Analysis

April 29th, 2019 Posted by Extended Analysis No Comment yet

Tesla Motors Inc (TSLA) has officially changed its name to Tesla Inc. The company has acquired Solar City in August 2016, a solar power company.

tesla-motors-inc

About the Company

Company Profile

Tesla, Inc. is an American automotive and energy company based in Palo Alto, California. The company specializes in electric car manufacturing and, through its SolarCity subsidiary, solar panel manufacturing. Founded July 1, 2003, in San Carlos, CA by Elon Musk.Source: Wikipedia

 

TESLA EXTENDED GRAPH ANALYSIS

 

A) TESLA CASH FLOW

TeslaCASH FLOWS

Net Cash flows provided by operating activities Net Cash used for investing activities Net Cash provided (used for) financing Capital Expenditure Free Cash Flow
2014 -57,337,000 -990,444,000 2,143,130,000 -969,885,000 -1,027,222,000
2015 -524,499,000 -1,673,551,000 1,523,523,000 -1,634,850,000 -2,159,349,000
2016 -123,829,000 -1,416,430,000 3,743,976,000 -1,440,471,000 -1,564,300,000
2017 -60,654,000 -4,418,967,000 4,414,864,000 -4,081,354,000 -4,142,008,000
2018 2,097,802,000 -2,337,428,000 573,755,000 -2,319,516,000 -221,714,000
TTM 2,097,802,000 -2,337,428,000 573,755,000 -2,319,516,000 -221,714,000

Facts

  • Net cash flows provided by operating activities was $2.098 billion in 2018 and the trailing twelve months.
  • Also, net cash used for investing activities was $-2.34 billion in 2018 and the trailing twelve months.
  • And, cash provided (used for) financing was $574 million in 2018 and the trailing twelve months.
  • On the other hand, capital expenditures were $-2.32 billion in 2018 and the trailing twelve months.
  • Free cash flow was $222 million in 2018 and the trailing twelve month

Explanation

  • The net cash flows provided by operating activities soared up to 103 percent from 2017 to 2018 due to depreciation.
  • Also, the net cash used for investing activities is the purchases of property and equipment, excluding capital leases, net of sales.
  • Net cash provided (used for) financing activities are proceeds from the issuance of convertible and other debt; and repayments of convertible and other debt. Plus collateralized lease borrowings and other repayments.
  • On the other hand, capital expenditures are an investment in property and equipment.
  • Free cash flow increases by 1768 percent although negative, compared to 2017.

Interpretation

Tesla suffered a negative free cash flow for the past five years due to its huge investment in property and equipment. However, in 2018, free cash flow improved by 1768 percent. There is no cash left over from cash from operations after operating expenses and capital expenditures or CAPEX.

B) TESLA BALANCE SHEET

tesla motors

BALANCE SHEET 2014 2015 2016 2017 2018
Total cash 1,905,713,000 1,196,908,000 3,393,216,000 3,367,914,000 3,685,618,000
Current Assets 3,198,657,000 2,791,568,000 6,259,796,000 6,570,520,000 8,306,308,000
Total assets 5,849,251,000 8,092,460,000 22,664,076,000 28,655,372,000 29,739,614,000
Current liabilities 2,107,166,000 2,816,274,000 5,827,006,000 7,674,670,000 9,992,136,000
Total liabilities 4,937,541,000 7,003,516,000 17,911,165,000 24,418,130,000 24,816,371,000
Equity 911,710,000 1,088,944,000 4,752,911,000 4,237,242,000 4,923,243,000
Retained earnings -1,433,682,000 -2,322,323,000 -2,997,237,000 -4,974,299,000 -5,317,832,000
Total debts 2,466,280,000 2,715,586,000 7,128,431,000 10,314,938,000 11,971,371,000
Working capital 1,091,000,000 -25,000,000 433,000,000 -1,104,000,000 -1,686,000,000

Facts

  • Total cash were $3.37 billion and $3.69 billion in 2017 and 2018 respectively.
  • And, current assets were $6.57 billion and $8.31 billion in 2017 and 2018 respectively.
  • Total assets were $28.66 billion and $29.34 billion in 2017 and 2018 respectively.
  • Current liabilities were $7.67 billion and $9.99 billion respectively.
  • Total liabilities were $24.42 billion and $24.82 in 2017 and 2018 respectively.
  • Equity were $4.97 billion and $5.32 billion in 2017 and 2018 respectively.
  • Retained earnings were -$4.97 billion and -$5.32 billion in 2017 and 2018 respectively.
  • Total debts were $10.31 billion and $11.97 billion in 2017 and 2018 respectively.
  • Working capital was -$1.1 billion and -$1.7 billion in 2017 and 2018 respectively.

Explanation

  • Total cash growth was 48 percent in five years period.
  • And, current assets growth was 61 percent in five years period. Increased in inventory has impacted the total.
  • While total assets growth was 80 percent in five years period.
  • Current liabilities increased 79 percent in five years due to an increase in accounts payable.
  • On the other hand, total liabilities increased 80 percent in five years due to an increase in long-term debt which increases year-over-year.
  • Equity has a growth of 81 percent in five years due to year-over-year increases in paid-in capital.
  • Retained earnings were negative in the last five years and falling year-over-year.
  • Moreover, total debts increase year-over-year and have grown 79 percent in five years. Long-term debt impacted the total and in 2018 the short term-debt increased by 186 percent from 2017 to 2018.
  • On the other hand, working capital was negative due to current liabilities are higher than the current liabilities in 2017 and in 2018. Due to increased accounts payable and short-term debt.

Interpretation

Tesla’s total current assets are not enough to pay its total current liabilities in the past two years because liabilities are higher than the current assets.

 

C) TESLA FINANCIAL RATIOS

tesla-motors

FINANCIAL RATIOS 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 TTM
Asset turnover (average) 1.23 0.45 0.37 0.45 1.14 0.77 0.58 0.46 0.46 0.73 0.73
Return on assets % -61.21 -59.76 -46.28 -43.36 -4.19 -7.11 -12.75 -4.39 -7.64 -3.34 -3.34
Financial leverage (average) 0.00 1.86 3.18 8.94 3.62 6.42 7.43 4.77 6.76 6.04 6.04
Return on equity % 0.00 0.00 -118.03 -227.22 -18.69 -37.25 -88.84 -23.11 -43.63 -21.31 -21.31
Return on invested capital % 0.00 0.00 -64.97 -72.34 -4.55 -8.45 -21.46 -6.27 -11.47 -1.90 -2.38
Interest coverage -21.01 -154.40 0.00 0.00 -1.17 -1.82 -6.37 -2.75 -3.69 -0.52 -0.52

Facts

  • Asset turnover was averaging 0.46 and 0.73 in 2017, 2018 respectively.
  • Return on assets was -7.64 percent and -3.34 percent in 2017 and 2018 respectively.
  • Financial leverage was averaging 6.76 and 6.04 in 2017 and 2018 respectively.
  • Return on equity was -43.63 percent and -21.31 percent in 2017 and 2018 respectively.
  • Return on invested capital was -11.47 percent and -1.90 percent in 2017 and 2018 respectively.
  • Interest coverage were -3.69 and -0.52 in 2017 and 2018 respectively.

Explanation

  • Asset turnover ratio means that each dollar of assets generates an average of 46 cents and 73 cents of sales in 2017 and 2018 respectively.
  • While the returns on assets (ROA) indicates that for every dollar that was invested in assets produced -$76.4 and -$33.4 of net income in 2017 and 2018 respectively. In other words, there were no returns on the dollar invested in assets because it is negative.
  • Moreover, financial leverage indicates that liabilities are 676 percent and 604 percent of shareholders’ equity in 2017 and 2018 respectively.
  • Also, return on equity indicates that every dollar of common shareholders’ equity earned -$43.63 percent and -$21.31 in 2017 and 2018 respectively. In other words, the shareholders did not earn a return on their investment.
  • Return on invested capital indicates that for every dollar invested in capital produces a -$0.1147 and -$0.0190 cents negative returns in 2017 and 2018 respectively.
  • On the other hand, interest coverage means that Tesla has negative 3.69 and negative -0.52 times earnings than its current interest payments in 2017 and 2018 respectively. In other words, its earnings are less than the current interest payment.

Interpretation

The profitability of Tesla was not impressive. The return on the investments in assets, equity and invested capital was negative meaning there was no return on the investment. Moreover, financial leverage was high at 604 percent. In addition, Its current interest payment is greater than its earnings.

 

D) TESLA INCOME AND MARKET

tesla-motors

  2014 2015 2016 2017 2018 TTM
Revenue 3,198,356,000 4,046,025,000 7,000,132,000 11,758,751,000 21,461,268,000 21,461,268,000
EBIT -186,689,000 -716,629,000 -667,340,000 -1,632,086,000 -252,840,000 -252,840,000
Net Income -294,040,000 -888,663,000 -674,914,000 -1,961,400,000 -976,091,000 -976,091,000
Market capitalization 27,954,000,000 31,543,000,000 34,423,000,000 52,328,000,000 57,442,000,000 48,338,000,000
Intrinsic value 6,912,210,299 12,344,598,323 1,227,212,668 9,992,830,135 27,736,000,163 35,273,927,556

Facts

  • Revenue were $11.76 billion and $21.46 billion in 2017 and 2018 respectively.
  • While EBIT was -$1.63 billion and -$253 million in 2017 and 2018 respectively.
  • Net income were -$1.96 billion and -$976 million in 2017 and 2018 respectively.
  • In addition, market capitalization were $57,442,000,000 and $48,338,000,000 in 2018 and the trailing twelve months respectively. The market value falls down by 20 percent in the trailing twelve months from 2018.
  • On the other hand, the intrinsic values were $27,736,000,163 and $35,273,927,556 in 2018 and the trailing twelve months respectively. In other words, the intrinsic value was $27.74 billion and $35.27 billion in 2018 and the trailing twelve months.

Explanation

  • The revenue growth was 85 percent in five years and it increases year-over-year.
  • While EBIT was erratic in movement and negative in the last five years.
  • In addition, net income was erratic in movement and was negative in the last five years.
  • Moreover, market capitalization has a growth of 42 percent in the last five years.
  • The intrinsic value was erratic in movement from 2014 to 2017. However, the value increased by 64 percent and 21 percent in 2018 and the trailing twelve months respectively.

Interpretation

Although the revenue increases year-over-year, the bottom line was not impressive. The cost of revenue represents 80 percent of the sales. In addition, the intrinsic value is lesser than the market capitalization of Tesla. It may be said that the market value is overstated.

E) KEY EXECUTIVE COMPENSATION

tesla-motors

Key Executive Compensation 2013 2014 2015 2016 2017
Key Executive Compensation 875,592 20,950,746 24,641,448 17,360,435 27,558,904
Elon Musk / CEO and Chairman of the Board 69,989 35,360 37,584 45,936 49,920
Deepak Ahuja / Chief Financial Officer 338,000 3,784,343 339,300 0 15,498,009
Jason Wheeler / Former Chief Financial Officer 0 0 20,898,296 501,931 174,041
Douglas John Field / Senior Vice President, Engineering 0 0 3,115,708 2,420,475 9,151,618
John Mcneil / Former President, Global Sales and Service 0 0 0 6,464,510 2,435,706
Jeffrey Straubel / Chief Technology Officer 467,603 17,131,043 250,560 7,927,583 249,600

DETAILED DISTRIBUTION

2013 2014 2015 2016 2017

Key Executive Compensation

Salary 620,880 622,960 980,521 1,601,503 1,702,407
Bonus 10,500 0
Annual Other Income 0
Restricted Stock Award 56,424 32,655 2,808,785 4,238,644 20,756,754
Securities Option 187,788 20,295,131 20,852,142 10,747,808 4,567,304
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 0 0 0 772,480 395,803
Other Compensation 0 0 0 0 136,636
Total 875,592 20,950,746 24,641,448 17,360,435 27,558,904

Elon Musk / CEO and Chairman of the Board

Salary 33,280 35,360 37,584 45,936 49,920
Bonus
Annual Other Income
Restricted Stock Award 10,620
Securities Option 26,089
LTIP Payout
Non-Equity Compensation
Other Compensation
Total 69,989 35,360 37,584 45,936 49,920
Deepak Ahuja / Chief Financial Officer
Salary 338,000 338,000 339,300 0 428,846
Bonus 0
Annual Other Income 0
Restricted Stock Award 10,501,859
Securities Option 3,446,343 4,567,304
LTIP Payout 0 0
Non-Equity Compensation 0 0
Other Compensation 0 0
Total 338,000 3,784,343 339,300 0 15,498,009

Jason Wheeler / Former Chief Financial Officer

Salary 0 0 46,154 501,931 174,041
Bonus
Annual Other Income
Restricted Stock Award
Securities Option 20,852,142
LTIP Payout
Non-Equity Compensation
Other Compensation
Total 0 0 20,898,296 501,931 174,041

Douglas John Field / Senior Vice President, Engineering

Salary 0 0 306,923 301,153 300,000
Bonus 0
Annual Other Income 0
Restricted Stock Award 2,808,785 2,119,322 8,851,618
Securities Option
LTIP Payout
Non-Equity Compensation
Other Compensation
Total 0 0 3,115,708 2,420,475 9,151,618

John Mcneil / Former President, Global Sales and Service

Salary 0 0 0 501,923 500,000
Bonus 0 0
Annual Other Income 0 0
Restricted Stock Award 2,119,322 1,403,277
Securities Option 3,070,785 0
LTIP Payout 0 0
Non-Equity Compensation 772,480 395,803
Other Compensation 0 136,626
Total 0 0 0 6,464,510 2,435,706

Jeffrey Straubel / Chief Technology Officer

Salary 249,600 249,600 250,560 250,560 249,600
Bonus 10,500 0
Annual Other Income 0 0
Restricted Stock Award 45,804 32,655
Securities Option 161,699 16,848,788 7,677,023
LTIP Payout 0 0
Non-Equity Compensation 0 0
Other Compensation 0 0
Total 467,603 17,131,043 250,560 7,927,583 249,600

Facts

  • The total key executive compensation was $27,558,904 in 2017.
  • Elon Musk total compensation was $49,920 in 2017.
  • While Deepak Ahuja total compensation was $15,498,009 in 2017.
  • In addition, Jason Wheeler total compensation was $174,041 in 2017.
  • Douglas John Field total compensation was $9,151,618 in 2017.
  • Moreover, John McNeil total compensation was $2,435,706 in 2017.
  • Jeffrey Straubel total compensation was $249,600 in 2017.

Explanation

  • The total key executive compensation had increased by 58.75 percent from the previous year.
  • Elon Musk total compensation represents 0.18 percent of the total key executive compensation.
  • While Deepak Ahuja total compensation represents 56.24 percent of the total key executive compensation.
  • And, Jason Wheeler total compensation represents 0.63 percent of the total key executive compensation.
  • Douglas John Field total compensation represents 33.21 percent of the total key executive compensation.
  • In addition, John McNeil total compensation represents 8.84 percent of the total key executive compensation.
  • Jeffrey Straubel total compensation represents 0.91 percent of the total key executive compensation.

Interpretation

The total key executive compensation represents 1.24 percent of the gross profit, however, its EBIT and net income were negative.

 

F) TESLA LOBBYING/CONTRIBUTIONS TO POLITICIANS

tesla-motors

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
40,000 30,000 170,000 120,000 120,000 0 0 0 560,000 820,000 760,000 890,000

 

Firms Hired

Total Reported by Filer

Reported Contract Expenses (Included in Total Reported by Filer)

Tesla Motors

$890,000.00

West Front Strategies $200,000.00
Holland & Knight $130,000.00
Tia Ginsberg & Assoc $120,000.00
Burton Strategy Group $15,000.00
Total $465,000.00

Lobbyists representing Tesla Motors Inc, 2018

Lobbying Firm Hired Amount Subsidiary

(Lobbied For)

Lobbyist
Burton Strategy Group $15,000.00 Tesla Motors Burton Jeff
Holland & Knight $130,000.00 Tesla Motors Dunham, Ben
Karakitsos, Dimitri
Mason, Scott D
Reynolds, Tom
Tesla Motors $890,000.00 Tesla Motors Hennessy, Scott
Kintz, Brooke Frankenfield
Nazar, Hasan
Veitch, Alexandra Norris
Tia Ginsberg & Assoc $120,000.00 Tesla Motors Ginsberg, Matt
Pike, Madelene
Tai, Jason
West Front Strategies $200,000.00 Tesla Motors Brown, Cindy S
Davis, Ashley E
Mcdaniel, Malloy
Remington, Kristi
Stein, Shimon

Source: OpenSecret.org   The Center for Responsive Politics

 

Facts

  • Lobbying was $40,000 in 2007.
  • And, lobbying in 2008 was $30,000.
  • In 2009 the lobbying was $170,000.
  • In 2010 the lobbying was $120,000.
  • While in 2011 the lobbying was $120,000.
  • On the other hand, in 2012, 2013 and 2014, the lobbying was $0.
  • Lobbying in 2015 was $560,000.
  • The lobbying in 2016 was $820,000.
  • Moreover, lobbying in 2017 was $760,000.
  • And in 2018 lobbying was $890,000.

Explanation

The total lobbying in 2018 of $890,000 represents 0.02 percent of the total operating expenses.

Interpretation

Total lobbying expenses are not shown in the financials of Tesla, however, yearly the company contributed to the politicians.

 

G) TESLA FINANCIAL STRENGTH

tesla-motors

DATA

Working Capital Total Assets Sales EBIT Market Value of Equity Book Value of Total Liabilities Retained Earnings
-1,686,000,000 29,739,614,000 21,461,268,000 -252,840,000 48,338,000,000 24,816,371,000 -5,317,832,000

Formula:

Z-Score =  1.2A + 1.4B + 3.3C + 0.6D + 1.0E

 

Calculation Ratio Z-Score Result
A – Working Capital / Total Assets -0.06 1.2 -0.07
B – Retained Earnings / Total Assets -0.18 1.4 -0.25
C – EBIT / Total Assets -0.01 3.3 -0.03
D – Market Value of Equity / Book Value of Total Liabilities 1.95 0.6 1.17
E – Sales / Total Assets 0.72 1.0 0.72
Z-Score 1.53

 

The Z-Score formula is computed as follows: Z-Score =  1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Facts

  • A – -0.06 * 1.2  = -0.07
  • B – -0.18 * 1.4 = – 0.25
  • C – -0.01 * 3.3 = – 0.03
  • D – 1.95  * 0.6 = 1.17
  • E – 0.72 * 1.0  = 0.72
  • Z – Score = 1.53

Explanation

Z-Score is a mathematical measurement that is used to compare data points from different sets of data to arrive at the relationship to the mean. This impression is often known as the Altman Z-Score. This measurement was used to forecast the likelihood of the company would go bankrupt.

Interpretation

The Z – Score of Tesla was 1.53. According to Altman, a score of 0 – 1.8 would likely to declare bankruptcy in the future. Let us go deeper into the analysis with care. Tesla is an auto industry and is highly capital intensive, in addition, its cost of revenue from year-to-year is expensive which needs a huge amount of cash to meet its production demands. Although Elon Musk has no problem in obtaining funds, he has somehow developed that trust among investors which is very significant.

This statistical measurement sums several weighted financial ratios and compares it to the scale shown above as A, B, C, D & E. The profitability, liquidity, leverage, and efficiency are the main factors of this measurement. Hence, total assets are the denominator in four equations, and total assets represent a huge percentage on all the ratios, the result is most likely negative and low.

Conclusion

Since Tesla was founded in 2003, investors believed that the company can succeed. In the past, Tesla has faced a number of challenges and was able to meet its target production but with a quarter of short-target production. There was an issue of Model 3 production mistakes which is excessive automation.

According to Bloomberg in an article written by Tom Randall and Dean Halford updated April 30, 2019, they estimated that the company had manufactured 241,253 cars of Model 3s or 22,640 units in the current quarter or 5,902 units per week. When I first valued Tesla in April 2014, the number of units I estimated at the end of 2014 was 42,250 units which are almost the actual number of units produced by the company when the report came out. I also projected the five years annual from 2015 up to 2019. The total number of units I projected at the end of 2019 was 259,521 units which are not far from the Bloomberg estimate.

Tesla Inc is not liquid because of the demand in cash is too high. Its financial leverage ratio was 6.04 or 604 percent, meaning debt is 604 percent of total equity. In other words, Tesla is using more debt than equity. The market price in 2019 drop by 28.66 percent from the end of 2018.

Elon Musk had established the confidence of many investors and I believed that the company will succeed although Tesla is experiencing a tough time running its operation due to the high volume of demands and production that must be manufactured and delivered.

I believed in the ability of Elon Musk in running the company as other investors have put there trust in him. I can say that I can recommend a Buy on the stock of Tesla Inc (TSLA).

CITATION

https://www.morningstar.com/stocks/XNAS/TSLA/quote.html

https://www.sec.gov/cgi-bin/browse-edgar?CIK=TSLA&owner=exclude&action=getcompany&Find=Search

 

Researched and written by Criselda

Twitter: criseldarome

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