Stock Analysis on Net
Stock Analysis on Net

Tesla Inc. (NASDAQ:TSLA)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Tesla Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 25.56%
01 FCFF0 4,448
1 FCFF1 4,966 = 4,448 × (1 + 11.65%) 3,955
2 FCFF2 5,704 = 4,966 × (1 + 14.85%) 3,618
3 FCFF3 6,733 = 5,704 × (1 + 18.05%) 3,402
4 FCFF4 8,164 = 6,733 × (1 + 21.25%) 3,285
5 FCFF5 10,160 = 8,164 × (1 + 24.45%) 3,256
5 Terminal value (TV5) 1,143,869 = 10,160 × (1 + 24.45%) ÷ (25.56% – 24.45%) 366,585
Intrinsic value of Tesla Inc. capital 384,101
Less: Debt and finance leases (fair value) 5,636
Intrinsic value of Tesla Inc. common stock 378,465
 
Intrinsic value of Tesla Inc. common stock (per share) $118.84
Current share price $155.45

Based on: 10-K (reporting date: 2023-12-31).

1 See details »

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.

Weighted Average Cost of Capital (WACC)

Tesla Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 495,076 0.99 25.79%
Debt and finance leases (fair value) 5,636 0.01 5.30% = 6.41% × (1 – 17.31%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 3,184,790,415 × $155.45
= $495,075,670,011.75

   Debt and finance leases (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (21.00% + 8.25% + 11.02% + 25.30% + 21.00%) ÷ 5
= 17.31%

WACC = 25.56%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Tesla Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense 156 191 371 748 685
Net income (loss) attributable to common stockholders 14,997 12,556 5,519 721 (862)
 
Effective income tax rate (EITR)1 21.00% 8.25% 11.02% 25.30% 21.00%
 
Interest expense, after tax2 123 175 330 559 541
Interest expense (after tax) and dividends 123 175 330 559 541
 
EBIT(1 – EITR)3 15,120 12,731 5,849 1,280 (321)
 
Current portion of debt and finance leases 2,373 1,502 1,589 2,132 1,785
Debt and finance leases, net of current portion 2,857 1,597 5,245 9,556 11,634
Stockholders’ equity 62,634 44,704 30,189 22,225 6,618
Total capital 67,864 47,803 37,023 33,913 20,037
Financial Ratios
Retention rate (RR)4 0.99 0.99 0.94 0.56 —
Return on invested capital (ROIC)5 22.28% 26.63% 15.80% 3.77% -1.60%
Averages
RR 0.87
ROIC 13.38%
 
FCFF growth rate (g)6 11.65%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 156 × (1 – 21.00%)
= 123

3 EBIT(1 – EITR) = Net income (loss) attributable to common stockholders + Interest expense, after tax
= 14,997 + 123
= 15,120

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [15,120 – 123] ÷ 15,120
= 0.99

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 15,120 ÷ 67,864
= 22.28%

6 g = RR × ROIC
= 0.87 × 13.38%
= 11.65%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (500,712 × 25.56% – 4,448) ÷ (500,712 + 4,448)
= 24.45%

where:

Total capital, fair value0 = current fair value of Tesla Inc. debt and equity (US$ in millions)
FCFF0 = the last year Tesla Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Tesla Inc. capital

FCFF growth rate (g) forecast

Tesla Inc., H-model

Microsoft Excel
Year Value gt
1 g1 11.65%
2 g2 14.85%
3 g3 18.05%
4 g4 21.25%
5 and thereafter g5 24.45%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 11.65% + (24.45% – 11.65%) × (2 – 1) ÷ (5 – 1)
= 14.85%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 11.65% + (24.45% – 11.65%) × (3 – 1) ÷ (5 – 1)
= 18.05%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 11.65% + (24.45% – 11.65%) × (4 – 1) ÷ (5 – 1)
= 21.25%