Tesla Inc. (NASDAQ:TSLA)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibits an overall increasing trend from 2020 to 2022, rising from 2,291 million US dollars in 2020 to a peak of 14,874 million US dollars in 2022. However, this positive momentum reverses in the subsequent years, with NOPAT declining to 11,309 million in 2023 and further dropping to 8,828 million by 2024.

Cost of Capital

The cost of capital remains relatively stable across the years, fluctuating slightly within a narrow range between 26.89% and 27.6%. This indicates consistent capital costs without significant increases or decreases over the periods analyzed.

Invested Capital

Invested capital shows a steady and substantial increase throughout the entire period. Starting at 39,217 million US dollars in 2020, it rises consistently each year to reach 67,545 million US dollars by 2024, representing a significant expansion in the capital base over five years.

Economic Profit

Economic profit remains negative for most years, indicating that the returns on invested capital do not exceed the cost of capital except in one year. Initially, economic profit improves from -8,255 million in 2020 to -3,888 million in 2021 and turns positive to 1,179 million in 2022. However, this improvement is not sustained, with economic profit declining sharply to -5,028 million in 2023 and further to -9,817 million in 2024, signaling value destruction in the latter years.

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.

Economic Profit

The economic profit exhibits significant volatility over the observed period. It started at a substantial negative value of -8,255 million USD in 2020, indicating losses beyond the cost of capital. There was an improvement in 2021, with the loss decreasing to -3,888 million USD, followed by a positive economic profit of 1,179 million USD in 2022, suggesting value creation during that year. However, this positive trend was not sustained, as economic profit declined sharply again to -5,028 million USD in 2023 and further deteriorated to -9,817 million USD in 2024, marking the lowest point in the five-year span.

Invested Capital

The invested capital has shown a steady and continuous increase throughout the period. Starting at 39,217 million USD in 2020, it rose moderately to 40,247 million USD in 2021, then experienced larger increments in subsequent years, reaching 49,621 million USD in 2022, 59,453 million USD in 2023, and peaking at 67,545 million USD in 2024. This trend indicates significant expansion or reinvestment of capital in the business over time.

Economic Spread Ratio

The economic spread ratio, which reflects the return spread over the cost of capital, mirrored the fluctuations seen in economic profit. It began with a deeply negative ratio of -21.05% in 2020, improving to -9.66% in 2021 and turning positive to 2.38% in 2022, consistent with the positive economic profit recorded that year. Subsequently, the ratio declined again to -8.46% in 2023 and further to -14.53% in 2024, reflecting diminished profitability relative to the cost of capital during those periods.

Overall Insights

The data reveals an overall pattern of increased capital investment paired with inconsistent profitability. Despite the steady growth in invested capital, the company struggled to consistently generate economic profit above its cost of capital. The brief positive economic spread in 2022 suggests a short period of efficiency or market advantage, but the reversion to negative values afterward indicates challenges in maintaining value creation in subsequent years. The negative trends in economic profit and spread ratio in 2023 and 2024, despite higher invested capital, point to potential concerns about capital allocation efficiency and returns on invested funds during the latter periods.

The financial data reveals several important trends over the five-year period under review.

Adjusted Revenues

There is a consistent and substantial increase in adjusted revenues from 31,908 million US dollars in 2020 to 98,060 million US dollars in 2024. This represents a growth of more than threefold over the period, with the largest absolute increase occurring between 2020 and 2021. Revenues show steady year-over-year growth until a slight decrease is observed between 2023 and 2024.

Economic Profit

The economic profit exhibits significant volatility. Beginning at a large negative value of -8,255 million US dollars in 2020, it improves markedly by 2022 to reach a positive 1,179 million US dollars. However, this improvement is not sustained, as economic profit declines sharply again in 2023 and further in 2024, reaching -9,817 million US dollars. This fluctuating pattern indicates unstable profitability despite the revenue growth.

Economic Profit Margin

The economic profit margin, expressed as a percentage, follows the trend of economic profit. It starts very negative at -25.87% in 2020, improves to a marginally positive 1.43% in 2022, but deteriorates afterwards, turning negative again in 2023 and worsening to -10.01% in 2024. This pattern suggests that even with increased revenues, the company is facing challenges in maintaining profitability relative to sales.

In summary, while adjusted revenues have shown strong growth, economic profit and economic profit margin have been inconsistent, with a brief positive phase in 2022 but significant declines in the subsequent years. This indicates that increased revenue has not translated into consistent economic profitability, possibly due to rising costs or other financial factors impacting net economic returns.