Industry Comparison: Evaluating Tesla Against Competitors In Automobiles Industry

In the fast-paced and highly competitive business world of today, conducting thorough company analysis is essential for investors and industry observers. In this article, we will conduct an extensive industry comparison, evaluating Tesla (NASDAQ:TSLA) in relation to its major competitors in the Automobiles industry. Through a detailed examination of key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and illuminate company's performance in the industry.

Tesla Background

Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. The company sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. Tesla has multiple vehicles in its fleet, which include luxury and midsize sedans and crossover SUVs. The company also plans to begin selling more affordable sedans and small SUVs, a light truck, a semi truck, and a sports car. Global deliveries in 2023 were a little over 1.8 million vehicles.

When analyzing Tesla, the following trends become evident:

• The Price to Earnings ratio of 47.13 for this company is 3.19x above the industry average, indicating a premium valuation associated with the stock.

• The elevated Price to Book ratio of 10.3 relative to the industry average by 5.69x suggests company might be overvalued based on its book value.

• The Price to Sales ratio of 7.3, which is 8.11x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.

• With a Return on Equity (ROE) of 13.66% that is 10.62% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.

• The company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $3.48 Billion, which is 0.01x below the industry average. This potentially indicates lower profitability or financial challenges.

• With lower gross profit of $4.44 Billion, which indicates 0.01x below the industry average, the company may experience lower revenue after accounting for production costs.

• With a revenue growth of 3.49%, which is much lower than the industry average of 4.28%, the company is experiencing a notable slowdown in sales expansion.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

When examining Tesla in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:

• Among its top 4 peers, Tesla has a stronger financial position with a lower debt-to-equity ratio of 0.15.

• This indicates that the company relies less on debt financing and maintains a more favorable balance between debt and equity, which can be viewed positively by investors.

Key Takeaways

In comparison to its peers in the Automobiles industry, Tesla's PE, PB, and PS ratios are all considered high, indicating that the stock may be overvalued based on these metrics. On the other hand, Tesla's high ROE suggests strong profitability relative to its equity, while its low EBITDA, gross profit, and revenue growth may raise concerns about the company's operational performance and growth potential within the industry.

This article was generated by Benzinga's automated content engine and reviewed by an editor.