Electric vehicle (EV) giant Tesla is known for its innovative electric cars, and although it has a strong following who consider it a “technology company,” its recent financial reports suggest otherwise.
According to Tesla’s most recent financial report, the company’s revenue in Q4 2022 was $24.3 billion. Of that total, only $3 billion or 12% of the revenue came from technology, with the majority of its earnings, $20.2 billion or 83%, coming from cars.
However, this doesn’t mean that Tesla isn’t a profitable company. In fact, the opposite is true. Tesla is a very profitable car company with a strong operating profit margin. In Q4 2022, Tesla generated a robust 16% operating profit margin from its business, and this margin dropped only slightly from the 16.8% average that Tesla had across the whole of 2022. The 16% operating profit margin is significantly higher than the 12.1% margin that Tesla earned in 2021 and the 6.2% margin it earned in 2020.
What’s even more remarkable is that Tesla has outperformed its larger rivals in the car industry in terms of profitability. Neither Ford nor General Motors (GM) have ever generated double-digit profit margins from their car businesses, whereas Tesla has achieved this feat in just 20 years.
Some investors may be put off by Tesla’s current P/E ratio of 49.4, which isn’t cheap. However, Tesla’s projected earnings growth rate is 22.6%, and it has a PEG ratio of 2.2. The good news is that sometimes even great companies like Tesla go on sale, and barely a month ago, it was possible to buy Tesla stock for less than 1x its PEG ratio. The stock market can present great opportunities, and if Tesla’s stock becomes cheap again, it could be a great opportunity for risk-takers to buy it before it rises again.
Electric vehicle (EV) giant Tesla is known for its innovative electric cars. Although it has a strong following who consider it a “technology company,” its recent financial reports suggest otherwise. According to Tesla’s most recent financial report, the company’s revenue in Q4 2022 was $24.3 billion. Of that total, only $3 billion or 12% of the revenue came from technology, with the majority of its earnings, $20.2 billion or 83%, coming from cars.
However, this doesn’t mean that Tesla isn’t a profitable company. Quite the opposite.
Tesla is a very profitable car company with a solid operating profit margin. In Q4 2022, Tesla generated a robust 16% operating profit margin from its business, and this margin dropped only slightly from the 16.8% average that Tesla had across the whole of 2022. The 16% operating profit margin is significantly higher than the 12.1% margin that Tesla earned in 2021 and the 6.2% margin it earned in 2020.
What’s even more remarkable is that Tesla has outperformed its larger rivals in the car industry in terms of profitability. Both Ford and General Motors (GM) have yet to generate double-digit profit margins from their car businesses, whereas Tesla has achieved this feat in just 20 years.
Some investors may be put off by Tesla’s current P/E ratio of 49.4, which isn’t cheap. However, Tesla’s projected earnings growth rate is 22.6%, with a PEG ratio of 2.2. The good news is that even great companies like Tesla sometimes go on sale, and barely a month ago, it was possible to buy Tesla stock for less than 1x its PEG ratio. The stock market can present great opportunities, and if Tesla’s stock becomes cheap again, it could be an excellent opportunity for investors to buy it before it rises again.
Tesla may not be the “technology company” its most devoted fans believe it to be. Still, it is a great and profitable car company with an impressive operating profit margin. While Tesla’s P/E ratio may not look cheap, its projected earnings growth rate suggests an excellent potential for future growth. Investors willing to buy Tesla stock when it’s on sale may be rewarded handsomely in the long run.
