Exercise 4 – Trading Multiples Analysis
Perform a trading multiples analysis of
Tesla, Inc.
(Nasdaq:
TSLA):
· Peruse the firm’s
Annual Report on Form 10-K for 2021
and
Q4 and FY2021 Update,
· Use the
Rosenbaum & Pearl comparable companies template
for your analysis,
· As you can see, I’ve already populated it with some relevant financial data for the target,
· Select the best comparable companies to the target (at least three),
· Complete the template for target and comps as of March 11, 2021; use Capital IQ Estimates/Income Statement/Balance Sheet/Cash Flow, SEC filings, or investor presentations,
· Use U.S. Dollars as reporting currency for non-U.S. stocks,
· Analyse historical financials for the last three fiscal years and the relevant stub periods,
· Reconcile reported Gross Profit, Operating Income, and Net Income with the template,
· Adjust the financials for non-recurring and non-operating items in the template,
· Work with basic shares outstanding (no need for an EPS dilution analysis),
· Make sure the left and right hand side of the balance sheet match exactly,
· Calculate the key operating performance indicators for target and comparable firms,
· Determine the most appropriate valuation metrics for target and comps,
· Write a simple
Excel model
to determine a suitable trading multiples range for target,
· For better comparison, update
“football field” chart
for target.
Complete the R&P template, your Excel model, the football field chart and write a memo which discusses the following questions:
1.) How did you normalize the firms’ financials?
2.) Which trading multiples are the most relevant to value target? Rank them.
3.) Which reference periods should be used to value target? Discuss the trade-offs.
4.) How are your comparable firms similar and how are they different from target? Is there a single closest comparable? Or should you value target using more than one industry tier?
5.) How does target perform operationally relative to your comparables? Should target trade at a premium or discount to these comps?
6.) Compare your implied valuation to target’s share price and explain the differences, if any.
7.) Is target mispriced by the market? Is the market irrational? Or could there be rational reasons for any differences to your analysis?