Tesla Inc (TSLA:NSQ) Analysis

Tesla, for those who don't know yet, is an American company founded in 2003 by Elon Musk, which has nearly 50,000 employees and produces electric cars, in the absence of profits. The share price has increased by nearly 280% in the last 6 months. For comparison, it takes between 15 and 20 years for the stock market to grow this much.

Valuation & dividend

Valuing a company like Tesla is a balancing act. It reminds me of the dotcom startup era when new pseudo-experts were hired by CNBC to explain the prices of this "new" economy. Things were different than they said. The usual ratios could not be taken into account. For electric battery cars it seems to be the same. At least in the minds of many speculators.

A bit reactionary on the edges, I will still, if you allow me, stick to my good old indicators. Tesla is trading at:

• It is impossible to say anything about recurring net profits. Only losses, whether in the last financial year or in previous ones. It is starting badly.
• 25.5 times tangible assets and 23.5 times book value. Enough to send us to the moon. With Elon Musk, it's possible.
• 6.3 times sales. As a guide, a ratio greater than 3 is generally a very good sell signal.
• 160 times the current free cash flow. This time we can go all the way to Mars. At least in this case the cash flow is positive, that's always something.
• It is impossible to comment on the average free cash flow, as previous financial years have all been negative.
• It is impossible to say anything about EBIT/EV and EBITDA//EV. Even EBIT and EBITDA are negative! Usually a company can make net losses, but much more rarely when we take the value before taxes, interest, depreciation and amortization!

As for the dividend, how can I put it... like the profit: non-existent. At least the distribution ratio is correct!

Balance sheet & result

The Palo Alto giant's liquidity is just about right, with a current ratio of 1.1 (up), but the quick ratio is only 0.8. The overheads are huge (80%), the gross margin is catastrophic, with only 16.6% (down moreover). We would almost think we were talking about a net margin, that's saying something. As for the latter, there's no point talking about it, since the company is making losses. On the other hand, we find a small positive margin of free cash flow with 3.94%. For profitability, we are in a similar trend, with a negative ROE and ROA, while the CFROA is 7%.

The debt is very significant, with a long-term debt ratio of 34% (and rising!). The entire debt represents 2.6 times the equity. As it stands, the company is simply unable to repay it, even over many years. The issuance of the debt has represented an average negative return for the shareholder of nearly -1% over the last five years. Worse, in parallel, Tesla increases its number of shares outstanding each year, which translates into an average negative return for the shareholder of -7.6%!

Conclusion

Zero dividend, debt and stock issuance, the shareholder of Elon Musk's company "receives" annually a negative return of -8.5%. This is not reflected in the price, quite the contrary, which is all the more worrying. Despite a beta that is surprisingly only 0.67, the volatility is alarming, with 57%! For the moment it benefits buyers, we just have to hope for them that they are not caught off guard. Piotroski's score is unsurprisingly lamentable, with 4 points out of 9.

In short. Tesla may one day break through, but for now there are far too many uncertainties. Buying one is pure speculation. At this price it can hurt a lot. As pointed out AGU, the capitalization of the Californian company is greater than that of Toyota, Volkswagen and Renault combined. It will have to sell a lot of battery-powered cars to reach this level...