Stock Analysis on Net

Tesla Inc. (NASDAQ:TSLA)

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.


Intrinsic Stock Value (Valuation Summary)

Tesla Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 21.11%
01 FCFE0 -726
1 FCFE1 = -726 × (1 + 0.00%)
2 FCFE2 = × (1 + 0.00%)
3 FCFE3 = × (1 + 0.00%)
4 FCFE4 = × (1 + 0.00%)
5 FCFE5 = × (1 + 0.00%)
5 Terminal value (TV5) = × (1 + 0.00%) ÷ (21.11%0.00%)
Intrinsic value of Tesla Inc. common stock
 
Intrinsic value of Tesla Inc. common stock (per share) $—
Current share price $871.27

Based on: 10-K (reporting date: 2021-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 3.16%
Expected rate of return on market portfolio2 E(RM) 12.24%
Systematic risk of Tesla Inc. common stock βTSLA 1.98
 
Required rate of return on Tesla Inc. common stock3 rTSLA 21.11%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rTSLA = RF + βTSLA [E(RM) – RF]
= 3.16% + 1.98 [12.24%3.16%]
= 21.11%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Tesla Inc., PRAT model

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Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Net income (loss) attributable to common stockholders 5,519  721  (862) (976) (1,961)
Revenues 53,823  31,536  24,578  21,461  11,759 
Total assets 62,131  52,148  34,309  29,740  28,655 
Stockholders’ equity 30,189  22,225  6,618  4,923  4,237 
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 10.25% 2.29% -3.51% -4.55% -16.68%
Asset turnover3 0.87 0.60 0.72 0.72 0.41
Financial leverage4 2.06 2.35 5.18 6.04 6.76
Averages
Retention rate 1.00
Profit margin -2.44%
Asset turnover 0.66
Financial leverage 4.48
 
FCFE growth rate (g)5 0.00%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income (loss) attributable to common stockholders ÷ Revenues
= 100 × 5,519 ÷ 53,823
= 10.25%

3 Asset turnover = Revenues ÷ Total assets
= 53,823 ÷ 62,131
= 0.87

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 62,131 ÷ 30,189
= 2.06

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × -2.44% × 0.66 × 4.48
= 0.00%


FCFE growth rate (g) forecast

Tesla Inc., H-model

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Year Value gt
1 g1 0.00%
2 g2 0.00%
3 g3 0.00%
4 g4 0.00%
5 and thereafter g5 0.00%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (2 – 1) ÷ (5 – 1)
= 0.00%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (3 – 1) ÷ (5 – 1)
= 0.00%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 0.00% + (0.00%0.00%) × (4 – 1) ÷ (5 – 1)
= 0.00%