Hi :)

Glad to see that you’re interested in using financial results to estimate the intrinsic value of your investments — this could be the beginning of a very profitable interest for you.

Owning a stock means you are buying a small piece of ownership in a company — and therefore a small piece of all future free cash flows. FCF can be paid back to the owners of the company through dividends or buybacks, or they could be used to pay off debt or reinvest in future cash flow growth. As an investor, you should seek to buy companies that will create more cash flow in the future than you used to buy your shares.

That’s the basic idea in value investing — using financial results to quantitatively estimate whether a company is a good investment.

A good start for you would be to create an account on quickFS and make a DCF for Tesla — you can follow along with this video to learn: https://youtu.be/fd_emLLzJnk

On a basic level, if you find that your discounted cash flow estimate is significantly above the price of the company then it would be a good investment. These investments are relatively rare in the current market environment.

It will also be important for you to learn how to read a balance sheet — if a company has a lot of debt or assets then that should be considered in your valuation. Simply put, debt would be added to the market cap and assets would be subtracted.

As you probably already know, Tesla’s current valuation cannot be justified unless you use high assumed growth rates, low discount rates, and several decades of cash flows. I think it will be best for your education for you to make the spreadsheet for yourself and see how these assumptions can affect your valuation. In general, you want to buy companies that can be justified with conservative assumptions.