Company research report

Company: Tesla

1. Overall industry analysis and firm strategy analysis

· Tesla company overview

Tesla(NASDAQ: TSLA), an American manufacturer that produces electric automobiles, solar panels, and batteries, was founded in 2003 by Martin Eberhard and Marc Tarpenning in Austin, Taxes of the United States. It was named after Serbian American inventor Nikola Tesla. Also, Tesla is the first automobile company that produces and sells federal compliant electric vehicles like known sports car Roadsters first released in 2008, then sedan Model S and Model 3, and SUV in Model X. Elon Musk, the CEO of Tesla, an South African-born American entrepreneur who co-founded the electronic-payment firm PayPal and formed SpaceX. He became its biggest shareholder in February 2004, aimed to accelerate the development of the electric car’s industry, leading Tesla’s market capitalization growth to $1.01 trillion, making it the world's 6th most valuable company.

electric vehicle industry overview+firm Strategy analysis

And this is just the beginning. With Tesla building its most affordable car yet, Tesla continues to make products accessible and affordable to more and more people, ultimately accelerating the advent of clean transport and clean energy production.

Explain Peer company compare

2. Profitability analysis (Dupont decomposition) over time and using comparables. The important part here is identifying performance strengths and weaknesses and the associated discussion rather than simply describing the ratios.

· Revenue analysis

Driven by the increase in the number of cars Tesla delivered, and increase in average sales prices, Tesla produced a stable growed revenue from 2019 to 2021. The 29.86% of CAGR gives a good sign that the company is running a profitable business.

· Profits+Margins analysis

In addition to having strong year-over-year revenue growth, Tesla has maintained stable gross

margins, from 16% to 25%, for the past three fiscal years, in part driven by Tesla’s explosive growth

during the COVID-19 period and manufacturing capacity.

In terms of the firm’s profitability from the figures that it is metaphorically speaking were starting to catch steam in the year 2019 as witnessed by a profit margin jump from a negative margin figure of -3% to a positive margin of 10%, with year-over-year profit margin of 3.51%, 2.29% and 10.25% in 2019, 2020 and 2021 respectively. effectively amounting to a 13% increase.

· ROE+roe decomposition

· ROA

There was a spike experienced in Tesla from the 2019 to 2021’s return on equity and assets,since the Model Y, SUV electric car published

· Peer comparisons

In terms of revenue growth, SAM hasoutpaced its peers in the industry except luxury brand Ferrari, with a

second profit margin 13.5%, ROE 28.26%, and ROA 10.12%, with over 70% share of automobile market.

3. Cash flow analysis both qualitative and quantitative

· Overall cash flow

Overall, SAM has a very healthy balance sheet with strong liquidity and little leverage. With regards to its cash flow profile, SAM’s operating cash index over the past few years has trended downwards, but has hovered around 1, suggesting that its earnings are largely backed by cash and supplemented by non-cash items, such as depreciation.

· Working capital management

AM’s high earnings quality corresponds to the health of its liquidity. Inventory has increased at a steady rate. SAM’s payables have also gone up as its accounts receivables have shrunk over th same time frame, suggesting that the company has been improving its cash conversion cycle. Thisis in line with the trend of increasing cash flow from operations, which indicates that SAM, a

mature firm, is able to effectively fund its current liabilities with current asset

· Capital expenditures

The cap expenditureshas largely outpaced depreciation in recent years as the company invested in its breweries,increasing manufacturing capacity, driving efficiencies and cost reductions and supporting innovation. Other than its $330 MM acquisition of Dogfish Head Brewery in 2019, its recent investments have been organic. While SAM is an established player in a mature industry, the trend of rising capex is reasonable because the company has been investing in manufacturing capacity for key growth segments, the Truly hard-seltzer and cider divisions.

· Peer comparisons of liquidity

The Tesla has a healthy asset turnover in 0.87, which is relatively higher than peer companys’ asset turnover rate float by 0.1, considered efficient to generate revenue or sales from company's assets. Also, its current ratio in March 2022 is 1.35, which is lower than average 2 indicating the weak short-term ability to pay obligations. Also, the industry current ratio is 1.98, proving that Tesla Inc is considered to be overvalued.

4. Pro Forma projections and discussing economic consistency (you can use my template or any other template of your choice). Important to discuss key assumptions e.g., growth, COGS etc.

5. DCF analysis

6. EBO/Residual income valuation (you can use my spreadsheet)

7. Relative valuation

8. Put it all together to provide an executive summary with a final conclusion on whether the firm is a buy or sell