Tesla Inc. (NASDAQ:TSLA)

The financial data reveals several notable trends in profitability, capital cost, invested capital, and economic profit over the five-year period ending December 31, 2024.

Net Operating Profit After Taxes (NOPAT)

NOPAT displays a significant increase from $2,291 million in 2020 to a peak of $14,874 million in 2022. This is followed by a decline in the subsequent two years, falling to $8,828 million by the end of 2024. The initial growth suggests a period of improved operational efficiency or revenue gains, while the later decrease indicates challenges impacting operational profitability.

Cost of Capital

The cost of capital remains relatively stable across the timeframe, fluctuating narrowly between 27.5% and 28.23%. Such stability suggests consistency in the company’s financing environment or risk profile despite other operational changes.

Invested Capital

Invested capital shows a steady upward trend throughout the period, increasing from $39,217 million in 2020 to $67,545 million by 2024. This consistent growth implies ongoing investment in assets or business expansion, potentially to support future growth ambitions.

Economic Profit

Economic profit remains negative for most years except for 2022, when it turns positive at $867 million. The negative values in other years, with particularly large deficits in 2020 (-$8,494 million), 2021 (-$4,141 million), 2023 (-$5,401 million), and 2024 (-$10,242 million), indicate that the returns generated were insufficient to cover the cost of capital. The positive economic profit in 2022 aligns with the peak in NOPAT, suggesting that operational gains were temporarily sufficient to exceed capital costs.

Overall, the financial indicators reveal a period of growth in profitability and invested capital, with a peak in operational performance in 2022 followed by a decline. Despite stable cost of capital, the majority of years reflect an inability to generate returns above the capital cost, except for the positive economic profit observed in 2022. The expanding invested capital base alongside fluctuating profit metrics may point to challenges in achieving sustainable value creation over the analyzed timeframe.

The financial data reveals notable fluctuations in key profitability metrics over the five-year period.

Net Income Attributable to Common Stockholders

Net income shows an overall increasing trend from 2020 to 2023, rising from $721 million in 2020 to a peak of $14,997 million in 2023. This represents a substantial growth in profitability over the first four years. However, in 2024, net income experiences a significant decline to $7,091 million, falling to less than half of the previous year's figure. This sudden drop interrupts the prior growth trajectory and suggests potential challenges or changes affecting net profitability in the most recent year.

Net Operating Profit After Taxes (NOPAT)

NOPAT follows a broadly upward movement from 2020 through 2022, increasing from $2,291 million to $14,874 million. This rapid growth underscores enhanced operating efficiency or higher operational earnings during this phase. Contrary to net income, NOPAT declines more moderately in 2023 and 2024, decreasing to $11,309 million and then to $8,828 million respectively. Despite the decline after 2022, NOPAT remains significantly above the 2020 base level over the entire period, indicating sustained operational profitability.

Comparatively, net income's volatility is more pronounced than that of NOPAT, especially in the latest year where net income dropped sharply relative to NOPAT. This could point to increased non-operating expenses, tax effects, or other one-time items impacting net income beyond operational performance. Overall, the company exhibited strong growth in profitability metrics until 2022, followed by a period of contraction in both net income and NOPAT through 2024.

Provision for (benefit from) income taxes

There is a notable increase in the provision for income taxes from 292 million US dollars in 2020 to 1,132 million US dollars in 2022, indicating a rising tax expense over this period. However, in 2023, the provision shifts dramatically to a benefit of -5,001 million US dollars, representing a significant tax benefit or reversal. In 2024, the provision returns to a positive amount of 1,837 million US dollars, suggesting a reinstatement of tax expenses though at a higher level than in previous years except for 2023.

Cash operating taxes

Cash operating taxes demonstrate a consistent upward trend from 422 million US dollars in 2020 to 1,335 million US dollars in 2022. However, in 2023 and 2024, cash taxes slightly decrease to 1,208 million and 1,164 million US dollars respectively. Despite this slight decline, the cash tax payments remain significantly higher than the 2020 level.

Overall Analysis

The data shows a divergence between the provision for income taxes and the cash operating taxes particularly in 2023, where the provision indicates a substantial tax benefit while cash taxes remain relatively stable and elevated. This pattern may suggest the influence of deferred tax accounting, tax credits, or other temporary differences affecting book income tax expense but not cash payments in that year. The fluctuations in the provision for income taxes reflect variability likely driven by changes in profitability, tax planning strategies, or legislative impacts. Meanwhile, cash taxes show a more stable yet gradually increasing pattern over the observed period.

Total Reported Debt & Leases

The total reported debt and leases exhibit a declining trend from 2020 through 2022, decreasing substantially from 13,228 million US dollars in 2020 to 5,748 million US dollars in 2022. However, this decreasing pattern reverses starting in 2023, where debt rises sharply to 9,573 million US dollars, followed by a further increase to 13,623 million US dollars in 2024, nearly returning to the 2020 level.

Stockholders’ Equity

Stockholders’ equity shows a consistent and strong growth trajectory over the five-year period. Starting at 22,225 million US dollars at the end of 2020, equity increases each year, reaching 72,913 million US dollars by the end of 2024. This steady rise reflects an accumulation of retained earnings and potentially increased capital contributions.

Invested Capital

Invested capital also demonstrates a continuous upward trend from 39,217 million US dollars in 2020 to 67,545 million US dollars in 2024. The increase is gradual with moderate growth between 2020 and 2021, followed by more pronounced growth in the subsequent years. This pattern suggests ongoing investments in the company’s operations and assets.

Summary of Trends

Over the period analyzed, there is evidence of a strategic shift in the company's financial structure. Initially, debt levels are reduced significantly until 2022, indicating efforts to deleverage the balance sheet. However, from 2023 to 2024, debt increases substantially, possibly to finance expansion or capital expenditures as reflected in the rising invested capital. Concurrently, stockholders' equity consistently grows, highlighting strong equity financing or retained earnings accumulation, enhancing the company's capital base. The simultaneous increase in invested capital and equity suggests robust reinvestment and capital strengthening, while the fluctuation in debt indicates a dynamic approach to leveraging.

The economic profit exhibits significant fluctuations over the reviewed periods. Initially, in 2020, the economic profit was notably negative at -8,494 million US dollars, indicating a substantial value destruction. This negative trend moderates considerably in 2021, reaching -4,141 million, suggesting an improvement in economic profitability, although still indicating value loss. In 2022, there is a marked positive turnaround with an economic profit of 867 million US dollars, suggesting the company generated value above its cost of capital for that year. However, this improvement is not maintained, as economic profit declines again sharply into negative territory in 2023 (-5,401 million) and decreases further in 2024 to -10,242 million, reflecting significant value erosion in the most recent years.

Invested capital shows a consistent upward trend throughout the period, increasing from 39,217 million US dollars in 2020 to 67,545 million by the end of 2024. This continuous increase signals ongoing investment and expansion of the company's asset base or capital employed in the business.

The economic spread ratio, which measures economic profit as a percentage of invested capital, mirrors the volatility seen in economic profit. In 2020 and 2021, this ratio is strongly negative (-21.66% and -10.29% respectively), indicating returns well below the cost of capital. A positive ratio of 1.75% in 2022 aligns with the positive economic profit reported for that year, confirming a brief period of value creation. However, similar to economic profit, the spread ratio turns negative again in 2023 (-9.08%) and worsens in 2024 (-15.16%), reaffirming the pattern of economic loss towards the end of the timeframe analyzed.

Overall, the data shows a company experiencing significant challenges in maintaining profitability above its cost of capital, despite a steady increase in invested capital. The brief recovery in 2022 did not sustain, resulting in a return to substantial negative economic profit and spread ratios in subsequent years. This trend highlights possible issues in generating effective returns on increased investments in recent years.

Adjusted Revenues

There has been a consistent and significant increase in adjusted revenues over the observed period. Starting at 31,908 million US dollars in 2020, revenues surged to 54,580 million in 2021 and continued a strong upward trajectory reaching 82,514 million in 2022. Growth persisted into 2023 with revenues hitting 98,337 million, followed by a slight decrease to 98,060 million in 2024, essentially stabilizing at a high level.

Economic Profit

The economic profit displayed notable volatility with a generally negative trend in most years. In 2020, the company experienced a substantial economic loss of -8,494 million US dollars, which improved significantly in 2021 to -4,141 million. In 2022, the company reached a positive economic profit of 867 million, marking the only year with profitability within the timeframe. However, economic profit then deteriorated sharply to -5,401 million in 2023 and further declined to -10,242 million in 2024, reflecting increasing economic losses in the latter years.

Economic Profit Margin

The economic profit margin followed a pattern consistent with economic profit figures. It started very negative at -26.62% in 2020 but improved significantly to -7.59% in 2021. By 2022, this margin turned positive at 1.05%, indicating a brief period of efficient profitability. Subsequently, the margin reverted to negative values, descending to -5.49% in 2023 and declining further to -10.44% in 2024, indicating a declining profitability relative to revenues towards the end of the period.

Overall Observations

The company demonstrated strong top-line growth throughout the period under review, nearly tripling adjusted revenues from 2020 to 2024. Despite this revenue growth, profitability as measured by economic profit and economic profit margin was inconsistent and mostly negative, indicating challenges in converting revenue growth into sustainable economic profitability. The brief positive economic profit and margin in 2022 suggest operational improvements or favorable conditions during that year, but the subsequent return to losses in 2023 and 2024 may warrant further investigation into cost management or other underlying factors.