With a daily gain of 1.39% and a three-month gain of 23.63%, Tesla Inc (TSLA, Financial) has been making waves in the investment world. Its Earnings Per Share (EPS) stands at 3.53, which begs the question: is the stock significantly undervalued? This article seeks to answer that question by providing an in-depth analysis of Tesla's valuation. We invite you to read on and discover the intrinsic value of Tesla (TSLA).
Company Introduction
Founded in 2003 and based in Palo Alto, California, Tesla Inc (TSLA, Financial) is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. Currently, the stock price is $242.14, significantly lower than the GF Value of $454.92, suggesting that the stock might be undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, Tesla stock shows every sign of being significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, it's essential to review a company's financial strength before deciding to purchase shares. Tesla has a cash-to-debt ratio of 3.97, which ranks better than 80.07% of 1204 companies in the Vehicles & Parts industry. This indicates that Tesla's financial strength is strong.
Profitability and Growth
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. Tesla has been profitable 3 over the past 10 years. Its operating margin is 13.49%, which ranks better than 88.05% of 1230 companies in the Vehicles & Parts industry. This indicates fair profitability.
Growth is a crucial factor in the valuation of a company. Tesla's 3-year average revenue growth rate is better than 93.65% of 1182 companies in the Vehicles & Parts industry. Its 3-year average EBITDA growth rate is 83.9%, which ranks better than 97.26% of 1058 companies in the same industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Over the past 12 months, Tesla's ROIC was 24.6, while its WACC came in at 19.43, indicating that the company is creating value for shareholders.
Conclusion
In summary, the stock of Tesla (TSLA, Financial) shows every sign of being significantly undervalued. The company's financial condition is strong, and its profitability is fair. Its growth ranks better than 97.26% of 1058 companies in the Vehicles & Parts industry. To learn more about Tesla stock, you can check out its 30-Year Financials here.
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