Is Tesla (NASDAQ:TSLA) A Risky Investment?

Simply Wall St.12-22 22:00

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when...

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What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when...</p>\n\n<a href=\"https://finance.yahoo.com/news/tesla-nasdaq-tsla-risky-investment-140018910.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BWXC8680.SGD","symbol_name":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","start_time":0,"source_url":"https://finance.yahoo.com/news/tesla-nasdaq-tsla-risky-investment-140018910.html","article_id":"2493244137","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/9XMS3UcgcDT0g1JMASMPzA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/8a9a68e8370d8514f2f282dc3b4a5a72"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2493244137","pubTimestamp":1734876018,"columns":[],"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"David Iben put it well when he said, 'Volatility is not a risk we care about. 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What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Tesla, Inc. (NASDAQ:TSLA) does have debt on its balance sheet. But the real question is whether this debt is making the company risky. \n When Is Debt Dangerous? \n Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together. \n See our latest analysis for Tesla \n What Is Tesla's Net Debt? \n As you can see below, at the end of September 2024, Tesla had US$7.39b of debt, up from US$3.70b a year ago. Click the image for more detail. However, it does have US$33.6b in cash offsetting this, leading to net cash of US$26.3b. \n\n\n\n  NasdaqGS:TSLA Debt to Equity History December 22nd 2024\n \n\n How Strong Is Tesla's Balance Sheet? \n The latest balance sheet data shows that Tesla had liabilities of US$30.6b due within a year, and liabilities of US$18.6b falling due after that. On the other hand, it had cash of US$33.6b and US$3.48b worth of receivables due within a year. So its liabilities total US$12.0b more than the combination of its cash and short-term receivables. \n This state of affairs indicates that Tesla's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the US$1.35t company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Tesla also has more cash than debt, so we're pretty confident it can manage its debt safely. \n It is just as well that Tesla's load is not too heavy, because its EBIT was down 24% over the last year. Falling earnings (if the trend continues) could eventually make even modest debt quite risky. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Tesla's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting. \n Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Tesla may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, Tesla produced sturdy free cash flow equating to 52% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to. \nSumming Up\n We could understand if investors are concerned about Tesla's liabilities, but we can be reassured by the fact it has has net cash of US$26.3b. So we are not troubled with Tesla's debt use. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the   2 warning signs  we've spotted with Tesla (including 1 which is potentially serious) . \n If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay. \nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2493244137"}