Tuesday, August 18th, 2015
I have written about Tesla a couple of times, but I just had to share the new data from the most recent earnings report, and why things for this company are unraveling and how the stock will see lows that will make investors cry.
And, as always, I will share with you the fundamentals from the financial statements.
If you were unaware that the chief financial officer is leaving the company and you own the company’s stock, you should be worried because this was announced during the shareholder meeting June 9. If you're not aware of this, you are really investing blindly.
Tesla has always talked a good game, but what it is not putting on the front page of its reports is that the loss increased from $11,000 per car last year to $15,000 per car in December. It is up to $16,000 per car on the recent report.
A year ago it was stated that this would get better — unfortunately, it has gotten worse.
The third-quarter estimates have gone down by about 15 percent. There was a lot of talk about how the new Model X was going to be a big hit, but on the last quarterly conference call it was not mentioned at all — even though the release is supposed to be within a month or so.
Tesla officials had talked about having 100,000 cars produced by now, but they have had to push that back to 2016.
If you have been following this company, you would know that back in 2014 it raised $2.3 billion.
Well, I guess they have pretty much burned through all that cash and you could be hearing talk of a new issue that will dilute the current shareholders if and when earnings ever become a reality.
Looking at some of the numbers from the financial statements, it is obvious this company has no price-to-earnings ratio because it has no earnings.
Price to sales for Tesla is 8.2 over the past 12 months. Compare that with the industry average of automobile manufacturing of 0.51 and you start to realize this is pretty scary.
Price to book value is 39.4, more than 10 times the industry average at 2.6.
Sometimes a company will not have earnings but will still have cash flow, which takes out depreciation and amortization. However, even looking at Tesla’s cash flow I see nothing there compared with the industry average of 5.8.
Tesla has grown its sales by 52 percent year over year, which is five times greater than the industry average of 10.3. But that is about the only reason why investors are buying this company.
It is said — and I believe — that a company has to make money sooner than later. Unfortunately for Tesla, its earnings per share have now declined by 207 percent, while the industry average has seen a 145 percent increase.
The current ratio for the company is 1.26, which is the same as the industry at 1.25. So I guess an investor might feel good about that. But again, this company has raised money from stock offerings and it looks like it will be doing it again.
It also has a lot of debt.
I say that because the debt to equity is 344 percent, far greater than the industry average of 196 percent.
It is also interesting to note that the return on equity is a negative 61 percent, when the industry is a positive 14.3 percent.
I do know about all the good things the company is trying to do, including building a battery plant and installing charging stations around the country that are free for Tesla owners to use. Well, that costs money and this causes Tesla to lose 14 cents on every dollar it brings in.
The company over the past 12 months has turned over the receivables 31.5 times, which does beat industry’s 4.7 times by a wide margin.
But also important is the inventory turnover, and this is where Tesla does not look very good. Over the past 12 months, Tesla has turned over the inventory only three times, compared with the industry average of 10.2.
Since December 2013, on a generally accepted accounting principle basis, the earnings per share are a loss of $7.43. The worst year is expected to be 2015, with the company losing $2.83.
Based on the mean calculation of seven analysts for the year ending December 2016, Tesla is expected to earn 14 cents per share.
When I talk about generally accepted accounting principles, I'm talking about a standard that is the rule for accounting. Companies like to use what is called pre-exempt, where they can pull out what they want and come up with higher numbers.
Here’s the difference: The pre-exempt earnings estimate for the year ending December 2016 is $2.82, which is $2.68 higher than the real accounting number.
Looking at a target sell price based on the real accounting number, the company would virtually be a penny stock and have a stock price around $2.31 per share.
I'm sorry if I’ve offended anyone, but that is the real accounting of the real worth of this company. I do believe it will probably take a couple of years for this to unwind.
The stock price has had some good moments but the company fundamentals will show that the stock was just a gamble and not a good investment.
Do you have a question or a company you'd like me to take a look at? Email me at Brent@WilseyAssetManagement.com!
Wilsey is president of Wilsey Asset Management and can be heard at 8 a.m. every Saturday on KFMB AM760. Information is provided by Reuters.
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