Intrinsic value of Tesla - TSLA

Previous Close

$339.60

  Intrinsic Value

$1,233

stock screener

  Rating & Target

str. buy

+263%

  Value-price divergence*

+5000%

Previous close

$339.60

 
Intrinsic value

$1,233

 
Up/down potential

+263%

 
Rating

str. buy

 
Value-price divergence*

+5000%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TSLA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 55.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  73.01
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  7,000
  11,200
  17,304
  25,878
  37,548
  52,975
  72,828
  97,756
  128,360
  165,168
  208,621
  259,060
  316,726
  381,761
  454,220
  534,082
  621,266
  715,647
  817,071
  925,376
  1,040,397
  1,161,985
  1,290,013
  1,424,384
  1,565,036
  1,711,949
  1,865,142
  2,024,678
  2,190,666
  2,363,256
  2,542,640
Variable operating expenses, $m
 
  11,010
  17,010
  25,438
  36,910
  52,074
  71,590
  96,094
  126,178
  162,361
  205,075
  254,656
  311,341
  375,271
  446,499
  525,003
  610,705
  703,481
  803,181
  909,644
  1,022,710
  1,142,231
  1,268,083
  1,400,169
  1,538,431
  1,682,846
  1,833,434
  1,990,259
  2,153,425
  2,323,080
  2,499,415
Fixed operating expenses, $m
 
  825
  846
  867
  889
  911
  934
  957
  981
  1,005
  1,030
  1,056
  1,083
  1,110
  1,137
  1,166
  1,195
  1,225
  1,256
  1,287
  1,319
  1,352
  1,386
  1,421
  1,456
  1,492
  1,530
  1,568
  1,607
  1,647
  1,689
Total operating expenses, $m
  7,667
  11,835
  17,856
  26,305
  37,799
  52,985
  72,524
  97,051
  127,159
  163,366
  206,105
  255,712
  312,424
  376,381
  447,636
  526,169
  611,900
  704,706
  804,437
  910,931
  1,024,029
  1,143,583
  1,269,469
  1,401,590
  1,539,887
  1,684,338
  1,834,964
  1,991,827
  2,155,032
  2,324,727
  2,501,104
Operating income, $m
  -667
  -635
  -552
  -427
  -250
  -10
  305
  705
  1,201
  1,803
  2,516
  3,348
  4,302
  5,380
  6,584
  7,914
  9,366
  10,941
  12,635
  14,444
  16,368
  18,402
  20,544
  22,794
  25,150
  27,611
  30,178
  32,852
  35,634
  38,528
  41,536
EBITDA, $m
  280
  146
  655
  1,377
  2,367
  3,682
  5,381
  7,519
  10,148
  13,315
  17,057
  21,404
  26,377
  31,989
  38,243
  45,139
  52,669
  60,822
  69,585
  78,943
  88,883
  99,392
  110,458
  122,074
  134,233
  146,934
  160,178
  173,972
  188,324
  203,247
  218,758
Interest expense (income), $m
  39
  209
  562
  1,074
  1,794
  2,773
  4,067
  5,733
  7,824
  10,392
  13,480
  17,126
  21,358
  26,196
  31,653
  37,732
  44,433
  51,748
  59,666
  68,176
  77,263
  86,913
  97,115
  107,857
  119,130
  130,931
  143,258
  156,111
  169,496
  183,423
  197,903
Earnings before tax, $m
  -746
  -844
  -1,114
  -1,501
  -2,044
  -2,783
  -3,763
  -5,028
  -6,623
  -8,590
  -10,964
  -13,778
  -17,056
  -20,816
  -25,069
  -29,819
  -35,066
  -40,807
  -47,032
  -53,732
  -60,895
  -68,512
  -76,570
  -85,062
  -93,981
  -103,321
  -113,080
  -123,259
  -133,862
  -144,895
  -156,367
Tax expense, $m
  27
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -675
  -844
  -1,114
  -1,501
  -2,044
  -2,783
  -3,763
  -5,028
  -6,623
  -8,590
  -10,964
  -13,778
  -17,056
  -20,816
  -25,069
  -29,819
  -35,066
  -40,807
  -47,032
  -53,732
  -60,895
  -68,512
  -76,570
  -85,062
  -93,981
  -103,321
  -113,080
  -123,259
  -133,862
  -144,895
  -156,367

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,393
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  22,664
  31,549
  48,744
  72,896
  105,769
  149,224
  205,149
  275,370
  361,578
  465,263
  587,665
  729,747
  892,185
  1,075,383
  1,279,494
  1,504,458
  1,750,046
  2,015,906
  2,301,609
  2,606,692
  2,930,695
  3,273,197
  3,633,840
  4,012,349
  4,408,553
  4,822,391
  5,253,920
  5,703,319
  6,170,890
  6,657,058
  7,162,367
Adjusted assets (=assets-cash), $m
  19,271
  31,549
  48,744
  72,896
  105,769
  149,224
  205,149
  275,370
  361,578
  465,263
  587,665
  729,747
  892,185
  1,075,383
  1,279,494
  1,504,458
  1,750,046
  2,015,906
  2,301,609
  2,606,692
  2,930,695
  3,273,197
  3,633,840
  4,012,349
  4,408,553
  4,822,391
  5,253,920
  5,703,319
  6,170,890
  6,657,058
  7,162,367
Revenue / Adjusted assets
  0.363
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
  0.355
Average production assets, $m
  4,881
  7,806
  12,061
  18,037
  26,171
  36,923
  50,761
  68,136
  89,467
  115,122
  145,409
  180,565
  220,758
  266,087
  316,592
  372,255
  433,023
  498,806
  569,499
  644,987
  725,157
  809,904
  899,139
  992,796
  1,090,830
  1,193,228
  1,300,004
  1,411,201
  1,526,894
  1,647,189
  1,772,220
Working capital, $m
  433
  -1,120
  -1,730
  -2,588
  -3,755
  -5,297
  -7,283
  -9,776
  -12,836
  -16,517
  -20,862
  -25,906
  -31,673
  -38,176
  -45,422
  -53,408
  -62,127
  -71,565
  -81,707
  -92,538
  -104,040
  -116,199
  -129,001
  -142,438
  -156,504
  -171,195
  -186,514
  -202,468
  -219,067
  -236,326
  -254,264
Total debt, $m
  7,128
  16,065
  30,698
  51,252
  79,226
  116,207
  163,799
  223,557
  296,920
  385,156
  489,320
  610,232
  748,467
  904,368
  1,078,066
  1,269,510
  1,478,506
  1,704,753
  1,947,886
  2,207,512
  2,483,239
  2,774,708
  3,081,615
  3,403,726
  3,740,896
  4,093,072
  4,460,303
  4,842,741
  5,240,645
  5,654,374
  6,084,391
Total liabilities, $m
  17,911
  26,848
  41,481
  62,035
  90,009
  126,990
  174,582
  234,340
  307,703
  395,939
  500,103
  621,015
  759,250
  915,151
  1,088,849
  1,280,293
  1,489,289
  1,715,536
  1,958,669
  2,218,295
  2,494,022
  2,785,491
  3,092,398
  3,414,509
  3,751,679
  4,103,855
  4,471,086
  4,853,524
  5,251,428
  5,665,157
  6,095,174
Total equity, $m
  4,753
  4,701
  7,263
  10,862
  15,760
  22,234
  30,567
  41,030
  53,875
  69,324
  87,562
  108,732
  132,936
  160,232
  190,645
  224,164
  260,757
  300,370
  342,940
  388,397
  436,674
  487,706
  541,442
  597,840
  656,874
  718,536
  782,834
  849,795
  919,463
  991,902
  1,067,193
Total liabilities and equity, $m
  22,664
  31,549
  48,744
  72,897
  105,769
  149,224
  205,149
  275,370
  361,578
  465,263
  587,665
  729,747
  892,186
  1,075,383
  1,279,494
  1,504,457
  1,750,046
  2,015,906
  2,301,609
  2,606,692
  2,930,696
  3,273,197
  3,633,840
  4,012,349
  4,408,553
  4,822,391
  5,253,920
  5,703,319
  6,170,891
  6,657,059
  7,162,367
Debt-to-equity ratio
  1.500
  3.420
  4.230
  4.720
  5.030
  5.230
  5.360
  5.450
  5.510
  5.560
  5.590
  5.610
  5.630
  5.640
  5.650
  5.660
  5.670
  5.680
  5.680
  5.680
  5.690
  5.690
  5.690
  5.690
  5.690
  5.700
  5.700
  5.700
  5.700
  5.700
  5.700
Adjusted equity ratio
  0.071
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -675
  -844
  -1,114
  -1,501
  -2,044
  -2,783
  -3,763
  -5,028
  -6,623
  -8,590
  -10,964
  -13,778
  -17,056
  -20,816
  -25,069
  -29,819
  -35,066
  -40,807
  -47,032
  -53,732
  -60,895
  -68,512
  -76,570
  -85,062
  -93,981
  -103,321
  -113,080
  -123,259
  -133,862
  -144,895
  -156,367
Depreciation, amort., depletion, $m
  947
  781
  1,206
  1,804
  2,617
  3,692
  5,076
  6,814
  8,947
  11,512
  14,541
  18,056
  22,076
  26,609
  31,659
  37,226
  43,302
  49,881
  56,950
  64,499
  72,516
  80,990
  89,914
  99,280
  109,083
  119,323
  130,000
  141,120
  152,689
  164,719
  177,222
Funds from operations, $m
  -818
  -63
  92
  302
  573
  909
  1,313
  1,786
  2,324
  2,923
  3,577
  4,278
  5,019
  5,793
  6,591
  7,407
  8,236
  9,074
  9,918
  10,767
  11,620
  12,479
  13,343
  14,217
  15,102
  16,002
  16,921
  17,861
  18,828
  19,824
  20,855
Change in working capital, $m
  -694
  -420
  -610
  -857
  -1,167
  -1,543
  -1,985
  -2,493
  -3,060
  -3,681
  -4,345
  -5,044
  -5,767
  -6,504
  -7,246
  -7,986
  -8,718
  -9,438
  -10,142
  -10,830
  -11,502
  -12,159
  -12,803
  -13,437
  -14,065
  -14,691
  -15,319
  -15,954
  -16,599
  -17,259
  -17,938
Cash from operations, $m
  -124
  357
  703
  1,160
  1,740
  2,452
  3,299
  4,278
  5,384
  6,603
  7,922
  9,322
  10,786
  12,296
  13,836
  15,393
  16,954
  18,512
  20,061
  21,598
  23,123
  24,638
  26,146
  27,654
  29,167
  30,693
  32,240
  33,815
  35,426
  37,083
  38,794
Maintenance CAPEX, $m
  0
  -488
  -781
  -1,206
  -1,804
  -2,617
  -3,692
  -5,076
  -6,814
  -8,947
  -11,512
  -14,541
  -18,056
  -22,076
  -26,609
  -31,659
  -37,226
  -43,302
  -49,881
  -56,950
  -64,499
  -72,516
  -80,990
  -89,914
  -99,280
  -109,083
  -119,323
  -130,000
  -141,120
  -152,689
  -164,719
New CAPEX, $m
  -1,440
  -2,925
  -4,254
  -5,976
  -8,134
  -10,752
  -13,838
  -17,375
  -21,331
  -25,655
  -30,287
  -35,156
  -40,193
  -45,330
  -50,504
  -55,664
  -60,767
  -65,783
  -70,693
  -75,488
  -80,170
  -84,747
  -89,236
  -93,656
  -98,035
  -102,398
  -106,775
  -111,197
  -115,694
  -120,295
  -125,031
Cash from investing activities, $m
  -1,416
  -3,413
  -5,035
  -7,182
  -9,938
  -13,369
  -17,530
  -22,451
  -28,145
  -34,602
  -41,799
  -49,697
  -58,249
  -67,406
  -77,113
  -87,323
  -97,993
  -109,085
  -120,574
  -132,438
  -144,669
  -157,263
  -170,226
  -183,570
  -197,315
  -211,481
  -226,098
  -241,197
  -256,814
  -272,984
  -289,750
Free cash flow, $m
  -1,540
  -3,057
  -4,333
  -6,023
  -8,198
  -10,918
  -14,231
  -18,173
  -22,761
  -27,999
  -33,877
  -40,375
  -47,464
  -55,109
  -63,276
  -71,930
  -81,038
  -90,573
  -100,513
  -110,840
  -121,546
  -132,625
  -144,080
  -155,916
  -168,147
  -180,788
  -193,858
  -207,383
  -221,387
  -235,901
  -250,956
Issuance/(repayment) of debt, $m
  948
  10,087
  14,632
  20,554
  27,975
  36,981
  47,592
  59,758
  73,363
  88,236
  104,164
  120,911
  138,235
  155,902
  173,698
  191,444
  208,995
  226,247
  243,133
  259,626
  275,727
  291,469
  306,907
  322,112
  337,170
  352,176
  367,231
  382,439
  397,903
  413,729
  430,018
Issuance/(repurchase) of shares, $m
  1,866
  2,613
  3,676
  5,100
  6,942
  9,258
  12,095
  15,491
  19,468
  24,039
  29,202
  34,949
  41,260
  48,113
  55,481
  63,338
  71,659
  80,420
  89,601
  99,189
  109,172
  119,544
  130,306
  141,460
  153,015
  164,982
  177,378
  190,219
  203,530
  217,334
  231,658
Cash from financing (excl. dividends), $m  
  3,744
  12,700
  18,308
  25,654
  34,917
  46,239
  59,687
  75,249
  92,831
  112,275
  133,366
  155,860
  179,495
  204,015
  229,179
  254,782
  280,654
  306,667
  332,734
  358,815
  384,899
  411,013
  437,213
  463,572
  490,185
  517,158
  544,609
  572,658
  601,433
  631,063
  661,676
Total cash flow (excl. dividends), $m
  2,196
  9,643
  13,976
  19,631
  26,719
  35,321
  45,456
  57,076
  70,071
  84,276
  99,489
  115,485
  132,031
  148,905
  165,903
  182,852
  199,616
  216,093
  232,222
  247,974
  263,353
  278,389
  293,133
  307,656
  322,038
  336,371
  350,750
  365,275
  380,046
  395,162
  410,719
Retained Cash Flow (-), $m
  -3,669
  -2,613
  -3,676
  -5,100
  -6,942
  -9,258
  -12,095
  -15,491
  -19,468
  -24,039
  -29,202
  -34,949
  -41,260
  -48,113
  -55,481
  -63,338
  -71,659
  -80,420
  -89,601
  -99,189
  -109,172
  -119,544
  -130,306
  -141,460
  -153,015
  -164,982
  -177,378
  -190,219
  -203,530
  -217,334
  -231,658
Prev. year cash balance distribution, $m
 
  1,821
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  8,852
  10,300
  14,531
  19,777
  26,063
  33,361
  41,585
  50,603
  60,237
  70,287
  80,537
  90,772
  100,792
  110,422
  119,514
  127,957
  135,674
  142,621
  148,785
  154,181
  158,844
  162,827
  166,195
  169,023
  171,388
  173,373
  175,056
  176,516
  177,828
  179,061
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  8,280
  8,955
  11,662
  14,543
  17,424
  20,105
  22,391
  24,112
  25,144
  25,424
  24,955
  23,801
  22,075
  19,924
  17,507
  14,983
  12,493
  10,149
  8,033
  6,195
  4,653
  3,402
  2,422
  1,677
  1,128
  738
  468
  288
  172
  99
Current shareholders' claim on cash, %
  100
  91.8
  85.2
  79.6
  74.8
  70.6
  67.0
  63.8
  60.9
  58.3
  55.9
  53.8
  51.8
  50.0
  48.3
  46.8
  45.3
  44.0
  42.7
  41.5
  40.4
  39.3
  38.3
  37.3
  36.4
  35.5
  34.6
  33.8
  33.0
  32.2
  31.5

Tesla, Inc. designs, develops, manufactures, and sells electric vehicles and stationary energy storage products in the United States, China, Norway, and internationally. The company primarily offers sedans and sport utility vehicles. It also offers electric vehicle powertrain components and systems to other manufacturers. The company sells its products through a network of Tesla stores and galleries, as well as through Internet. In addition, it designs, manufactures, installs, monitors, maintains, leases, and sells solar energy systems to government, residential, and commercial customers; and sells electricity generated by solar energy systems to customers. The company was formerly known as Tesla Motors, Inc. and changed its name to Tesla, Inc. in February 2017. Tesla, Inc. was founded in 2003 and is headquartered in Palo Alto, California.

FINANCIAL RATIOS  of  Tesla (TSLA)

Valuation Ratios
P/E Ratio -81.3
Price to Sales 7.8
Price to Book 11.5
Price to Tangible Book
Price to Cash Flow -442.5
Price to Free Cash Flow -35.1
Growth Rates
Sales Growth Rate 73%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.9%
Cap. Spend. - 3 Yr. Gr. Rate 40.4%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 125.8%
Total Debt to Equity 150%
Interest Coverage -18
Management Effectiveness
Return On Assets -4.1%
Ret/ On Assets - 3 Yr. Avg. -7.7%
Return On Total Capital -8.6%
Ret/ On T. Cap. - 3 Yr. Avg. -15.3%
Return On Equity -23.1%
Return On Equity - 3 Yr. Avg. -49.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 22.8%
Gross Margin - 3 Yr. Avg. 24.4%
EBITDA Margin 3.4%
EBITDA Margin - 3 Yr. Avg. -2.7%
Operating Margin -9.5%
Oper. Margin - 3 Yr. Avg. -11%
Pre-Tax Margin -10.7%
Pre-Tax Margin - 3 Yr. Avg. -13.7%
Net Profit Margin -9.6%
Net Profit Margin - 3 Yr. Avg. -13.6%
Effective Tax Rate -3.6%
Eff/ Tax Rate - 3 Yr. Avg. -2.8%
Payout Ratio 0%

TSLA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TSLA stock intrinsic value calculation we used $7000 million for the last fiscal year's total revenue generated by Tesla. The default revenue input number comes from 2016 income statement of Tesla. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TSLA stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.9%, whose default value for TSLA is calculated based on our internal credit rating of Tesla, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Tesla.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TSLA stock the variable cost ratio is equal to 98.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $805 million in the base year in the intrinsic value calculation for TSLA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Tesla.

Corporate tax rate of 27% is the nominal tax rate for Tesla. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TSLA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TSLA are equal to 69.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Tesla operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TSLA is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4753 million for Tesla - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 163.547 million for Tesla is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Tesla at the current share price and the inputted number of shares is $55.5 billion.

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COMPANY NEWS

▶ 10 Cars That Are Much Faster Than They Look   [Jul-26-17 04:43AM  The Cheat Sheet]
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▶ Musk fires back: Zuckerberg has limited understanding of AI dangers   [Jul-25-17 10:14PM  American City Business Journals]
▶ Tesla wins back top consumer rating for Model S   [03:04PM  San Jose Mercury News]
▶ Tesla Model 3 Buyers Antsy for Delivery   [02:02PM  Bloomberg Video]
▶ How Has Tesla Stock Fared So Far in July?   [01:51PM  Market Realist]
▶ 3 Stocks the Market Is Wrong About   [01:30PM  Motley Fool]
▶ Ford 2Q Preview: Profits Going in Reverse   [12:35PM  Investopedia]
▶ 3 Things Tesla Doesn't Want to Admit   [04:09PM  TheStreet.com]
▶ 10 Stocks to Give as Gifts   [04:08PM  TheStreet.com]
▶ Facebooks cafeteria workers vote to unionize   [01:01PM  American City Business Journals]
▶ Investors Bailing On Hedge Funds   [Jul-23-17 05:43PM  Benzinga]
▶ [$$] California Says Tesla Is Too Big to Fail   [12:35AM  The Wall Street Journal]
▶ This Week in Solar   [Jul-21-17 08:30PM  Motley Fool]
▶ Lithium ETF: More Than A Tesla Story   [08:29AM  Benzinga]
▶ GM Eases Summer Production of Chevrolet Bolt   [12:48AM  The Wall Street Journal]
▶ Tesla Model 3 Launch Event: What to Expect   [Jul-20-17 06:06PM  Motley Fool]
▶ GM Eases Summer Production of Chevrolet Bolt   [01:53PM  The Wall Street Journal]
▶ Tesla: Bullish? Bearish? Nope.   [10:27AM  Barrons.com]
Stock chart of TSLA Financial statements of TSLA Annual reports of TSLA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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