Tesla Motors Inc (NASDAQ:TSLA) may have garnered applause from Wall Street following its report of its performance for the first quarter of 2015 but there is a metric about the company that investors should worry about or at least keep a close eye on.
That is according to Charley Grant who tells his colleagues at The Wall Street Journal that the sales numbers reported by Tesla Motors Inc (NASDAQ:TSLA) do not paint a whole picture of the company’s situation.
The metric that makes Grant skeptical about the performance of the often-discussed technology darling is its rising finished product inventory.
“Sales at Tesla is growing and investors are excited about that but what is not getting as much attention is that the inventory line of the balance sheet has been growing at a much faster pace for the past five quarters,” Grant says.
This means that the automotive industry innovator may be making too many cars even with its current increase of sales, The Wall Street Journal says.
Tesla Motors Inc (NASDAQ:TSLA) started reporting its total deliveries as part of its quarterly performance report last week. On Friday, the company said that it delivered a total of 10,030 cars in the first quarter of 2015, up 55% sequentially and significantly more than its guidance for the quarter of 9,500 cars.
“There’s no hard and fast rules when you look at inventory but if they were loading up on raw materials, that could be a good sign for demand. The trouble is that the inventory is increasingly made up of finished goods which suggests that they are slower to be sold,” Grant said.
One alternative way to look at this is that the company may have made too many cars as it has expected more of them to be sold.
According to a graph the publication displayed, Tesla Motor’s inventory as a percentage of automotive revenue increased to 100% in the fourth quarter of 2014 compared to about 88% in 3Q2014, about 77% in 2Q2014 and about 73% in 1Q2014.
Another metric that Grant and his colleagues pointed to was margins which Tesla Motors Inc (NASDAQ:TSLA) does not report.
Daniel Benton’s Andor Capital Management owned 1.25 million Tesla Motors Inc (NASDAQ:TSLA) shares by the end of December.
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