Editing Tesla, Inc.
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|What's the estimated company peak market share? | |What's the estimated company peak market share? | ||
|10% | |10% | ||
| | |Stockhub estimates that especially given the leadership of the company, the peak market share of Tesla is around 10%, and, therefore, suggests using the share amount here. As of 31st December 2021, Tesla's current share of the market is estimated at around 1.8%. | ||
|- | |- | ||
|Which distribution function do you want to use to estimate company revenue? | |Which distribution function do you want to use to estimate company revenue? | ||
|Gaussian | |Gaussian | ||
|Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function (i.e. the revenue distribution is bell shaped)<ref>http://escml.umd.edu/Papers/ObsCPMT.pdf</ref>, so | |Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function (i.e. the revenue distribution is bell shaped)<ref>http://escml.umd.edu/Papers/ObsCPMT.pdf</ref>, so Stockhub suggests using that function here. | ||
|- | |- | ||
|What's the estimated standard deviation of company revenue? | |What's the estimated standard deviation of company revenue? | ||
| 6 years | | 6 years | ||
|Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Tesla's current revenue amount (i.e. $54 billion) and Tesla's estimated lifespan (i.e. 60 years) and Tesla's estimated current stage of its lifecycle (i.e. growth stage), the Stockhub | |Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Tesla's current revenue amount (i.e. $54 billion) and Tesla's estimated lifespan (i.e. 60 years) and Tesla's estimated current stage of its lifecycle (i.e. growth stage), the Stockhub company suggests using 6 years (i.e. 68% of all sales happen within 6 years either side of the mean year), so that's what's used here. | ||
|- | |- | ||
| colspan="3" |'''<div style="text-align: center;">Growth stages</div>''' | | colspan="3" |'''<div style="text-align: center;">Growth stages</div>''' | ||
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|Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation.<ref>Stef Hinfelaar et al.:, 2019.</ref> | |Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation.<ref>Stef Hinfelaar et al.:, 2019.</ref> | ||
In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company.<ref>Dickinson, 2010.</ref> A summary of the economic links to cash flow patterns can be found in the appendix of this report. | In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company.<ref>Dickinson, 2010.</ref> A summary of the economic links to cash flow patterns can be found in the appendix of this report. Stockhub estimates that with Tesla's operating cash flows positive (+), investing cash flows negative (-) and its financing cash flows positive (+), the company is in the second stage of growth (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth. Note, to account for one-off events, the three-year average (median) amount was used to calculate the cash flows. | ||
On 7th February 2022, Tesla said it currently expects: to continue to generate net positive operating cash flow as it has done in the last four fiscal years; its capital expenditures to be between $5.00 to $7.00 billion in 2022 and each of the next two fiscal years; and its ability to be self-funding to continue as long as macroeconomic factors support current trends in its sales. Accordingly, based on forward looking statements, it appears that the company is in stage two of the business lifecycle (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth remaining. | On 7th February 2022, Tesla said it currently expects: to continue to generate net positive operating cash flow as it has done in the last four fiscal years; its capital expenditures to be between $5.00 to $7.00 billion in 2022 and each of the next two fiscal years; and its ability to be self-funding to continue as long as macroeconomic factors support current trends in its sales. Accordingly, based on forward looking statements, it appears that the company is in stage two of the business lifecycle (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth remaining. | ||
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|Net borrowing ($000) | |Net borrowing ($000) | ||
|Zero | |Zero | ||
| | |Stockhub suggests that for simplicity, the net borrowing figure is zero. | ||
|- | |- | ||
|Interest amount ($000) | |Interest amount ($000) | ||
|Zero | |Zero | ||
| | |Stockhub suggests that for simplicity, the interest amount figure is zero. | ||
|- | |- | ||
| colspan="3" |'''<div style="text-align: center;">Growth stage 4</div>''' | | colspan="3" |'''<div style="text-align: center;">Growth stage 4</div>''' | ||
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|Net borrowing ($000) | |Net borrowing ($000) | ||
|Zero | |Zero | ||
| | |Stockhub suggests that for simplicity, the net borrowing figure is zero. | ||
|- | |- | ||
|Interest amount ($000) | |Interest amount ($000) | ||
|Zero | |Zero | ||
| | |Stockhub suggests that for simplicity, the interest amount figure is zero. | ||
|} | |} | ||
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===What's the expected return of an investment in the company?=== | ===What's the expected return of an investment in the company?=== | ||
Stockhub estimates that the expected return of an investment in the company over the next five years is negative 24%. In other words, an £1,000 investment in the company is expected to return £760 in five years time. The assumptions used to estimate the return figure can be found in the table below. | |||
Assuming that a suitable return level over five years is 10% per year and Tesla achieves its expected return level (of negative 24%), then an investment in the company is considered to be an 'unsuitable' one. | Assuming that a suitable return level over five years is 10% per year and Tesla achieves its expected return level (of negative 24%), then an investment in the company is considered to be an 'unsuitable' one. | ||
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#By comparing the investment to other similar investments (i.e. relative valuation). | #By comparing the investment to other similar investments (i.e. relative valuation). | ||
Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, so that's the approach that | Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, so that's the approach that Stockhub suggests to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report). | ||
Tesla has never paid cash dividends, and on 7th February 2022, it said that it currently does not anticipate paying any cash dividends in the foreseeable future. Accordingly, | Tesla has never paid cash dividends, and on 7th February 2022, it said that it currently does not anticipate paying any cash dividends in the foreseeable future. Accordingly, Stockhub suggests using the free cash flow valuation method (rather than the dividend discount model). | ||
|- | |- | ||
|Which financial forecasts to use? | |Which financial forecasts to use? | ||
| Stockhub | | Stockhub | ||
|The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by the Stockhub | |The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those. | ||
|- | |- | ||
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>''' | | colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>''' | ||
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| Which type of multiple do you want to use? | | Which type of multiple do you want to use? | ||
| Growth-adjusted EV/sales | | Growth-adjusted EV/sales | ||
| For the numerator, | | For the numerator, Stockhub believes that to account for the different financial leverage levels of its peers, it's best to use enterprise value (EV), rather than price. For the denominator, Stockhub believes that because it expects Tesla to reinvest almost all of its revenue back into the business over the five year forecast period and therefore its earnings are expected to be abnormally low over the period, it's best to use sales. Accordingly, Stockhub suggests valuing its company using the EV/sales ratio. However, Stockhub feels that to take into account the different business lifecycle stages of its peers, the most suitable valuation multiple to use is the growth-adjusted EV/sales multiple<ref group="Note" name="Note15" />, rather than the EV/sales multiple. | ||
|- | |- | ||
|In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use? | |In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use? | ||
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|Cost of goods sold as a proportion of revenue (%) | |Cost of goods sold as a proportion of revenue (%) | ||
|62% | |62% | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|- | |- | ||
|Operating expenses as a proportion of revenue (%) | |Operating expenses as a proportion of revenue (%) | ||
|13% | |13% | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|- | |- | ||
|Tax rate (%) | |Tax rate (%) | ||
|14% | |14% | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|- | |- | ||
|Depreciation and amortisation as a proportion of revenue (%) | |Depreciation and amortisation as a proportion of revenue (%) | ||
|4% | |4% | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|- | |- | ||
|Fixed capital as a proportion of revenue (%) | |Fixed capital as a proportion of revenue (%) | ||
|{{#expr:trunc(11085000/365817000*100)}}% | |{{#expr:trunc(11085000/365817000*100)}}% | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|- | |- | ||
|Working capital as a proportion of revenue (%) | |Working capital as a proportion of revenue (%) | ||
|{{#expr:trunc((134836000-125481000)/365817000*100)}}% | |{{#expr:trunc((134836000-125481000)/365817000*100)}}% | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|- | |- | ||
|Net borrowing ($000) | |Net borrowing ($000) | ||
|${{formatnum:{{#expr:trunc(15613000+109106000-62639000)}}}} | |${{formatnum:{{#expr:trunc(15613000+109106000-62639000)}}}} | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|- | |- | ||
|Interest amount ($000) | |Interest amount ($000) | ||
|$2,645,000 | |$2,645,000 | ||
| | |Stockhub suggests that to account for one-off events, it's best to take the three-year average (median) amount. | ||
|} | |} | ||