Tesla (TSLA)

By both methods, the value today (DCF $64 · Multiples $54) is below the market price ($378).

Today — expensive, no margin of safety: at $378 trades ~600.0% above its value discounted to today (~$54); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$33.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($378) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (66.8%/year) above our base case (12.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$65.9 bn of owner earnings in year 5 (vs ~$9 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on EV/EBIT (auto + energía). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Model of the base business (auto + energy) on EV/EBIT — robotaxi/Optimus/FSD are not in here (they are optionality, valued separately and not paid for). The three-digit entry multiple reflects that the price is optionality, not the base. Rolling grid: the base year is the real TTM (revenue $103.6bn to Jun-2026, XBRL) and the projection is 12-month windows. The path starts at +8% and not at the +11.8% of the trailing year: that rebound comes from autos against a weak comparison and from services, while Energy —the piece the mix rests on— decelerated to +12.5% from the +27% previously attributed to it, so extrapolating the consolidated figure would mean extrapolating the part that least supports the thesis. Nor is it anchored to guidance, because the company does not publish annual numerical guidance: that is declared and the trajectory is used instead. The base-year operating margin is 4.22% and the path recovers it to ~8% by the fifth year, not to the previous ~10.8%: last quarter's operating income fell 57% year over year to a 1.4% margin on lower regulatory credits and a lower average selling price, meaning the deterioration is structural and volume is being bought with price. Maintenance capex is split by Greenwald ($7.95bn of $12.9bn), above depreciation ($6.5bn), because sales are growing. The base-year cash margin (14.4%) is reported operating flow (18.0%) net of stock-based compensation (3.7pp of revenue — a cost that at Tesla consumes 66% of free cash flow): the flow shown is owner earnings; the valuation runs on operating income, which also expenses it.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $67 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $378, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $67 in 5 years and a required return of 4.5% annually, the maximum to pay today is $54. Against the current market price ($378), the margin of safety is -600.0% (trades above the maximum → a premium is paid) and the total return at that price would be -29.2% annually.

• Anchor: sum of the parts by piece. Automotive plus services and Energy are valued separately, each by EV/EBIT — the base anchors well below the market price.
• Optionality dominates the price. About three-quarters of the quote corresponds to unproven optionality (robotaxi/FSD, Optimus), not to the current operating business.
• Extreme entry multiple. The current entry multiple (298×) sits well above any reasonable range for an automaker or an energy company; even five years out, with the projected growth, the multiple remains elevated.
• Margin of safety. On the operating base there is no margin of safety at any hurdle: the verdict is Overvalued.
• Optionalities kept separate. Robotaxi, Optimus and FSD licensing are listed apart from the base, not quantified within intrinsic value — it is the correct method, and it is precisely that optionality the market price is already paying for.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✕ CFROIC backs up the ROIC (57%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Strong and predictable cash generation. Free cash flow (~US$6.2 billion in FY2025) is positive but volatile, depressed by growth capital expenditure (artificial intelligence, factories) and affected by the decline in automotive margin. CFROIC (~7.7%) sits just above book ROIC (~7%): earnings are backed by cash, once maintenance capital expenditure (anchored to actual depreciation) is separated from growth capital expenditure, which is most of total capital spending.
• Sustainably high ROIC. The base ROIC is around 7%, below the 10% bar — far from the levels of a quality compounder.
• Creates economic value (EVA). With ROIC below the 10% bar, the base's economic profit is negative today; the company's real value creation depends on the optionalities (robotaxi, Optimus) lifting that return above the cost of capital.
• Reinvestment runway. Wide in terms of deployed capital (factories, artificial intelligence, robotics), but does not yet demonstrate an attractive incremental return in the base business.
• Accounting distortions to watch. Growth capex (artificial intelligence, training, robotics) depresses reported free cash flow without yet translating into revenue — maintenance capex should be separated from growth capex to avoid under- or over-estimating the base.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The group reads as a sum of the parts with two engines of opposite sign. The automotive business responds to volume × price (deliveries × average price): deliveries stalled and pulled back, and average price gives way on product mix and financing incentives, so auto revenue contracts despite the scale. Energy is the strongest growth and profitability engine: deployed storage tripled in two years and drags revenue that more than doubled, with segment gross margin expanding toward the 30% range. The value-creation lever is shifting from autos — under price pressure today — to energy.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real growth, not nominal. Consolidated revenue fell −3% in FY2025: the automotive contraction (−10%) outweighed Energy's growth (+27%). There is no material currency distortion in this reading.
• Where the engine comes from. Energy is the only segment growing strongly; automotive, still the bulk of revenue, is contracting on price and volume.
• Realistic deceleration / reacceleration. Automotive rebounded +16% in the first quarter of 2026 after 2025's decline — a volume bounce, not necessarily the start of a sustained reacceleration.
• Driven by volume or by price. Automotive revenue falls despite some volume recovery because average selling price keeps declining on product mix and financing incentives.
• Reinvestment runway. Energy (grid storage) has a long runway given the storage TAM's low penetration (46.7 GWh deployed in 2025); automotive, by contrast, competes in an increasingly saturated market.

• Relevant in 10 years / recurrence. Electric vehicles and energy storage are structurally expanding categories, but the car is an infrequent, highly price-sensitive purchase, not recurring revenue.
• Market share / cost. Tesla lost relative share to BYD and other Chinese manufacturers, which compete with aggressive cost structures; in Energy, by contrast, it holds a leadership position with the Megapack.
• Pricing power. Weak in automotive: the price war and list-price cuts show Tesla is defending volume by giving up margin, not the other way around.
• Operating leverage. Present in vehicle manufacturing and in software (FSD), but not showing up today: operating margin fell instead of expanding with scale.
• Supply-side / capital cycle. The EV sector attracted heavy capital (Chinese manufacturers, legacy makers electrifying their lineup) and compressed industry returns; energy storage, by contrast, still faces less direct competition.
• Recession behavior. The car is a discretionary durable good, sensitive to the cycle and to financing rates; Energy, tied to grid and data infrastructure, is somewhat more stable.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $34.5 bn
• ✓Interest coverage (EBIT / interest)13.1x
• ✓Liquidity (current ratio)1.94×
• ✕Cash quality (CFROIC vs ROIC)CFROIC backs 57% of ROIC
• ✕Value creation (ROIC − 10% bar)-3pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 2.0x
• –Float / working capitalNeutral WC
• !Dilution (SBC % of revenue + shares)SBC 3.7% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Net cash / balance sheet. Net cash of approximately US$36 billion and low financial debt (~US$8 billion) — the balance sheet is not a risk to the thesis.
• Liquidity. Current assets to current liabilities at comfortable levels, with no debt maturities creating refinancing pressure.
• Margin quality (capital-heavy). The automotive business is capital-intensive and the margin has compressed sharply; balance sheet strength offsets, but does not repair, depressed operating profitability.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation (ROIC). Reinvests virtually all cash generated into factories, artificial intelligence, and robotics; the base ROIC (~7%) sits below the 10% bar, so the reinvestment has not yet demonstrated returns above the opportunity cost.
• Alignment / skin in the game. Elon Musk owns approximately 13% of the equity, a high level of alignment with the long-term shareholder.
• Integrity / communication / focus. The CEO's attention is split among Tesla, SpaceX, xAI and political activity, and the stock-based compensation package is enormous and litigated — two sources of corporate governance friction.
• Dilution / compensation. Stock-based compensation (~US$2.8 billion in FY2025) is a material source of dilution for the minority shareholder.

• It is not cheap: it trades at an extreme premium to the value of its operating business — the base (automotive + energy) is worth on the order of US$67 per share and the market pays US$378, several times that value.
• The price does not discount an underestimated business, but a bet on unproven future execution: robotaxi/FSD (only just launched in Dallas and Houston in 2026) and Optimus (still in internal pilot production) explain the gap between the base's value and the quote.
• The operating margin has been compressing (4.2% over the trailing twelve months, down from ~17% in 2022) and the latest reported quarter fell to 1.4%, with operating income −57% year over year on lower regulatory credits and a lower average selling price: there is no pessimistic market reading of a healthy business here — the business genuinely deteriorated and the price ignores it.
• No forced seller is identified either (recent spin-off, one-off result, media noise disconnected from the business): the valuation reflects Musk's long-term artificial intelligence and robotics narrative, sustained by the market itself, not a discrepancy between perception and reality in the buyer's favor.

Unlike the rest of the library, no clear source of undervaluation is identified for Tesla. On the contrary: at market price the operating base does not justify it, and roughly three-quarters of the quote corresponds to unproven optionality (robotaxi, Optimus) that the market already pays for in advance. The thesis only validates if those optionalities materialize; today the stock trades at a premium, not a discount.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -37%/year (-90% total): the margin of safety protects the downside. The bull (-19%/year, -66% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Automotive margin. Competition from BYD and other Chinese manufacturers, together with the end of US EV tax credits (OBBBA), pressures price and volume — the base's central risk.
• Robotaxi/Optimus execution. The price already pays for the execution of initiatives not yet proven at scale (regulation, safety, competition from Waymo); a delay or a regulatory setback directly hits the part of the price that is today optionality.
• Key-man. The brand and much of the narrative depend on Elon Musk's figure, with attention spread across several companies and political activity.
• Dilution. Stock-based compensation (~US$2.8 billion in FY2025) recurrently dilutes the minority shareholder.
• Demanding multiple (no margin for error). At this price, any disappointment in the execution of the optionalities can trigger an abrupt multiple compression.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: narrow moat, eroding.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 12% at a multiple/growth of 24.8 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 0% (EBIT/EV) + ROIC 7% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 67% vs our 12%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -37%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, eroding; sources: intangibles, cost advantage, switching costs, efficient scale, network effects → fails the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 67% growth, far above our 12% — heroic assumptions.