Tesla | Assessing its Q3

  • Revenue up 56% year-on-year

  • Net margin rises to 15.3% (from 11.8%)

  • Short-term liquidity still >60%

  • Total cash levels up 31.1%

 

Tesla Inc (NSDQ: TSLA) was incorporated in 2003 and is headquartered in Austin, Texas. It designs, develops, manufactures, leases, and sells electric vehicles, as well as energy generation and storage systems in the United States, China, and internationally.

(Source: Tesla Inc)

The company as of 21 October 2022 is valued at $649.51bn, although shares have fallen from $400 to $215 since the start of the year. But how exactly have Tesla been performing financially over recent financial quarters, and is it worth the huge valuation?


(Source: Google Finance)

Tesla released its Q3 for the year on 19 October 2022. Revenue was up 56% to $21,454m (compared to last year), while net profit was up 103.5% to $3,292m. This means its net margin improved from 11.8% to 15.3%. Tesla first achieved an annual profit in 2020 with $690m, followed by $5,520m in 2021. It also shows that revenue and net income improved in last year's Q4, which might add to short-term optimism regarding seasonal variations.

(Source: EcoShares Ltd)

Looking at Tesla's current assets and current liabilities, we can measure their ability to pay short-term debt or obligations due within one year. The short-term liquidity (current liabilities/current assets) of Tesla is high, at a current rate of 68.4%, despite improving from 72.2% this time last year. Investors will want to see this rate drop below 50% as soon as possible and show a tighter control of liabilities. Rising interest rates will not coincide well for company's with high liabilities, although rising net profit margins may provide optimism that its liquidity will continue improving. Current assets increased 44% to $35,990m, while current liabilities increased 36.3% to $24,611m.

(Source: EcoShares Ltd)

Tesla's long-term liquidity (total liabilities/total assets) is at a much healthier rate than its short-term liquidity, having dipped to 46.5% in the Q3. This shows that the company is in a tighter financial position in the short-term period (one year), than its long-term. Total assets increased 28.7% to $74,426m since last year, while total liabilities were up at a slower rate of 12.3% to $34,575m. Long-term liquidity has improved from 53.2% to 46.5% during that timeframe.

(Source: EcoShares Ltd)

Total cash levels have also been steadily increasing since last year, which is impressive when liquidity is simultaneously decreasing, which again may be thanks to rising net profit margins. Total cash increased 31.1% to $21,107m, which made up 61.1% of the company's total liabilities.

(Source: EcoShares Ltd)

So amid improving revenue, net profit margins, liquidity and cash levels - investors will still be questioning whether Tesla is worth it given its ballooned market capitalisation. So to make it easier to visualise, we've provided the following chart:


(Source: EcoShares Ltd)

Tesla reports its Q4 earnings on approximately 24 January 2023.