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3 Incredible Graphs That Show Tesla’s Strength


EEven the most famous investors can be wrong. Like all of us, they have to sift through a lot of information and invest their money with the best probability of generating returns, even if it means betting that a stock will go down. And sometimes a sketchy-looking company finds its footing, driving the stock up.

This has happened in recent years with You’re here (NASDAQ: TSLA). Investors like Jim Chanos, David Einhorn and Michael Burry of The big court celebrities have all taken turns predicting the demise of the electric vehicle (EV) maker. The result was quite the opposite. And these charts show just how much financial momentum the company has built.

Image source: Tesla.

Headwinds can’t slow it down

Automakers have faced significant challenges over the past few years. Lockdowns, stretched supply chains and inflation have taken their toll on companies trying to pull vehicles off the assembly line and off customers. In the first quarter of 2022, auto sales in the United States fell 12% compared to the previous year.

That’s another story for Tesla. Although production was flat quarter over quarter, it was up 69% from a year ago. He did this while managing to steadily increase gross margin – what’s left of revenue after cost of sales. While the industry bemoans multiple cost pressures, Tesla appears to be defeating them.

Chart illustrating the increase in gross margin for the automotive business over time.

Data source: Tesla. Table by author.

cash is king

One way to see if these better gross margins carry over to the financial statements is to look at operating cash flow. Indeed, Tesla’s operating cash flow has skyrocketed since 2018. And it actually far exceeds the company’s operating income.

It’s a number experts look for to indicate accounting shenanigans – the ratio of operating cash flow to revenue. It may be a red flag if it is consistently below 1.0. Tesla gets the green light. The company is actually much stronger than its income statement indicates. It generates much more cash than what is reported as operating income.

Chart showing that Tesla always generates more operating cash than operating profit.

Data source: Tesla. Table by author.

Clean up the balance sheet

This allows it to eliminate huge chunks of short and long term debt. Tesla’s debt eclipsed its annual revenue just a few years ago. Now the bonds don’t even match what analysts think he’ll earn this year. In the most recently completed quarter, Tesla reduced its debt by $2 billion – the balance now stands at about a third of what it was in the same period last year.

Table of Current Debt and TSLA Lease Obligation (Annual Per Share)

TSLA Current Debt & Capital Lease Obligation (Annual Per Share) data by YCharts

All systems are working

Tesla has a controversial past. It had to do with the financial outlook, high valuation, and CEO Elon Musk’s outlandish periodic claims and behavior. Some things never change.

One thing that has changed is the number of opponents. And for good reason. It gains in profitability in a difficult economic environment, it prints money and it eliminates bonds which constituted a risk factor. While some are still skeptical about the stock’s prospects, the numbers show the company is only going from strength to strength.

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Jason Hawthorne has no position in the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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