Tesla Inc. (NASDAQ:TSLA)

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a significant upward trend from 2020 to 2022, increasing from 2,291 million USD in 2020 to a peak of 14,874 million USD in 2022. However, subsequent years show a reversal of this trend, with NOPAT declining to 11,309 million USD in 2023 and further down to 8,828 million USD in 2024. This indicates a reduction in operating profitability in the most recent periods after a phase of substantial growth.

Cost of Capital

The cost of capital has remained relatively stable over the examined years, fluctuating narrowly between approximately 26.69% and 27.39%. This suggests consistent capital costs with no significant changes in funding expenses or risk profile over the period.

Invested Capital

Invested capital has demonstrated a steady increase throughout the period, rising from 39,217 million USD in 2020 to 67,545 million USD in 2024. This reflects an expansion in asset base or capital deployed within the business, indicating ongoing investment or growth initiatives.

Economic Profit

Economic profit has exhibited considerable volatility. It began with a substantial negative value of -8,176 million USD in 2020, which improved to -3,803 million USD in 2021 and turned positive at 1,283 million USD in 2022. However, the trend reversed sharply thereafter, with economic profit declining to -4,905 million USD in 2023 and worsening to -9,675 million USD in 2024. This trend suggests that the company generated value above its cost of capital only in 2022, while in other years, it failed to cover the cost of capital, indicating value destruction during those periods despite growing invested capital.

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 analysis of the economic profit, invested capital, and economic spread ratio over the five-year period reveals several important trends and insights.

Economic Profit

The economic profit demonstrates significant volatility and a generally negative trend. Starting with a substantial loss of -8,176 million US$ in 2020, the loss improved markedly in 2021 to -3,803 million US$, then turned positive in 2022 with a profit of 1,283 million US$. However, this improvement was short-lived, as the company experienced renewed economic losses of -4,905 million US$ in 2023 and a further decline to -9,675 million US$ in 2024. This pattern indicates instability in generating value above the cost of capital, with a peak in 2022 followed by increasing losses in subsequent years.

Invested Capital

Invested capital shows a consistent and substantial upward trajectory throughout the period. Starting at 39,217 million US$ in 2020, it increased steadily each year to reach 67,545 million US$ by 2024. This represents a cumulative increase of over 72%, suggesting significant ongoing investments in assets or operations. The rising invested capital reflects an expansion strategy or substantial reinvestment in the business despite fluctuating economic profits.

Economic Spread Ratio

The economic spread ratio, which measures the return earned in excess of the cost of capital as a percentage, follows a similar pattern to economic profit but remains largely negative. It improved from -20.85% in 2020 to -9.45% in 2021 and then achieved a positive spread of 2.59% in 2022. However, after this brief positive performance, it declined again to -8.25% in 2023 and further to -14.32% in 2024. This indicates that the company was only able to earn returns above its cost of capital for a single year, with profitability metrics degrading in the latter years, signaling reduced efficiency or increasing costs associated with capital investments.

Overall, the financial metrics suggest that while the company aggressively increased its invested capital over the analyzed period, its ability to generate economic profit and maintain a positive economic spread ratio was inconsistent and deteriorated after 2022. This could be indicative of rising costs, diminishing returns on investment, or other operational challenges impacting profitability despite increased capital investment.

The analysis of the annual financial data reveals several noteworthy trends in the company's performance over the five-year period from 2020 to 2024.

Adjusted Revenues

The adjusted revenues exhibit a strong upward trajectory from 2020 through 2023, starting at 31,908 million US dollars in 2020 and increasing significantly to 98,337 million US dollars in 2023. In 2024, the revenues slightly decline to 98,060 million US dollars, essentially stabilizing near the previous year's level. This overall growth followed by stabilization suggests a rapid expansion phase that has since plateaued.

Economic Profit

The economic profit shows a volatile pattern across the reported years. Initially, there is a significant negative economic profit of -8,176 million US dollars in 2020, improving noticeably to -3,803 million US dollars in 2021. The company achieves positive economic profit in 2022, with 1,283 million US dollars, indicating a profitable year in economic terms. However, this profitability is not sustained, as the economic profit turns negative again in 2023 (-4,905 million US dollars) and further declines to -9,675 million US dollars in 2024. This reversal signals challenges in maintaining economic profitability despite the growth in revenues.

Economic Profit Margin

The economic profit margin mirrors the economic profit trend, starting with a deep negative margin of -25.62% in 2020 and improving to -6.97% in 2021. It crosses into positive territory in 2022 at 1.56%, which aligns with the year of economic profit recorded. However, the margin falls back into negative levels in the subsequent years, registering -4.99% in 2023 and worsening to -9.87% in 2024. This indicates that the company’s capability to generate economic profit relative to its revenues weakened after 2022.

In summary, the data reflect a period of rapid revenue growth until 2023, accompanied by fluctuating economic profitability. The firm managed to reach positive economic profit in 2022, but this was not sustained in the following years, as both absolute economic profit and the economic profit margin deteriorated. The divergence between strong revenue figures and declining economic profit suggests increasing costs or capital charges that counteract revenue gains. Immediate attention to cost management and efficiency may be necessary to restore sustained economic profitability.