Summary
- Tesla is on a mission to accelerate the world's transition to sustainable energy.
- The Stockhub company estimates that the expected return of an investment in the company over the next five years is 4.4x. In other words, an £1,000 investment in the company is expected to return £4,400 in five years time.
Operations
What's the mission of the company?
Tesla is a company that's on a mission to accelerate the world's transition to sustainable energy.
What's the main offerings of the company?
Model S
Model 3
Model X
Model Y
Powerwall
Market
Competition
Team
Chief Executive Officer
Chief Financial Officer
Chairmen
Financials
Income statement
Balance sheet
Cash flow statement
Risks
Valuation
Which time period to use to estimate the expected return?
Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.
Which valuation approach to use?
One of the simplest ways to estimate the value a company is to use the relative valuation approach, which bases the valuation of the company on the valuation of similar companies.
Relative valuation approach
Which type of multiple to use?
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 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 the 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, rather than the EV/sales multiple.
Stockhub suggests that with sales expected to grow exponential over the five year forecast period, it's best to use forward-looking data, rather than historic data.
In regards to the growth-adjusted EV/sales multiple, for the sales figure, Stockhub suggests that in order to account for the expected exponential growth of the business, it's best to use one at the end of the forecast period (i.e. Year 5). Stockhub also suggests that for the sales growth figure, it's best to use Year 6 to 8.
Which are the peers?
| Investments | Industry | Enterprise value/sales | 1-year forward revenue growth rates (%) | Growth-adjusted enterprise value/sales ratio |
|---|---|---|---|---|
| Apple Inc. | Internet content & communication | 7.27x[1] | 8.20%[1] | 89x |
Which forecasts to use?
What's the expected return?
Accordingly, Stockhub estimates that the expected return of an investment in Tesla Inc over the next five years is 4.4x. In other words, an £1,000 investment in the company is expected to return £4,400 in five years time.
The return figure estimate is based on the following key assumptions: an industry (online advertising) standard growth-adjusted enterprise value/sales multiple of 89x, Stockhub's year-5 revenue estimate (of $82.8 billion), Stockhub's year-6 to year-8 compound annual growth rate estimate (of 53.80%), net cash of ccc and the current estimated company valuation (of $900.80 billion).
The calculation is as follows: (89 x $82.8 billion x 0.538) / $900.80 billion = 4.4x.
What's the conclusion?
Notes
References
Actions
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