Tesla Motors Inc.'s Sell Recommendation Supported

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Tesla Motors (Nasdaq: TSLA) has been reiterated by TheStreet Ratings as a sell with a ratings score of D. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.20 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, TSLA maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 30.44%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, TSLA's net profit margin of -8.92% significantly underperformed when compared to the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Automobiles industry average, but is greater than that of the S&P 500. The net income increased by 65.3% when compared to the same quarter one year prior, rising from -$110.81 million to -$38.50 million.
  • TESLA MOTORS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TESLA MOTORS INC reported poor results of -$3.70 versus -$2.52 in the prior year. This year, the market expects an improvement in earnings ($0.62 versus -$3.70).
  • Compared to other companies in the Automobiles industry and the overall market, TESLA MOTORS INC's return on equity significantly trails that of both the industry average and the S&P 500.

Tesla Motors, Inc. designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. Tesla has a market cap of $21.9 billion and is part of the consumer goods sector and automotive industry. Shares are up 18.6% year to date as of the close of trading on Friday.

You can view the full Tesla Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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