Tesla Vs. Honda: Which Auto Manufacturer Is A Better Buy?

Recent Financial Results

In the fourth quarter ended Dec. 31, 2020, TSLA’s total revenues increased 46% year-over-year to $10.74 billion. Its gross profit has risen 49% from the same period last year to $2.07 billion, while its non-GAAP net income grew 134% from the year-ago value to $903 million. However, its automotive gross margin was 24.1% over this period, versus 27.7% in the third quarter of 2020.

HMC’s sales revenue has increased 0.6% year-over-year to $3,771.5 billion in the quarter ended Dec. 31, 2020, due primarily to an increase in sales revenue from its automobile business. The company’s operating profit rose 66.7% from the prior-year quarter to $277.7 billion, due mainly to increased efficiency of R&D expenditures and cost reduction efforts.

Expected Financial Performance

Analysts expect TSLA’s revenue to increase 66.7% in the current quarter, and 30.4% next year. The company’s EPS is expected to grow 34.3% next year. Moreover, its EPS is expected to grow at a rate of 32.1% per annum over the next five years.

In comparison, analysts expect HMC’s revenue to increase 249.7% in the current quarter, and 11.4% next year. The company’s EPS is expected to grow 36.2% next year. HMC’s EPS is expected to grow at a rate of 21.8% per annum over the next five years.

Profitability      

HMC’s trailing-12-month revenue is four times TSLA’s. But TSLA is slightly more profitable with a gross profit margin of 21% versus HMC’s 20.4%. However, HMC’s net income margin of 3.2% and cash from operations of $11.62 billion compare favorably with TSLA’s 2.3% and $5.94 billion, respectively.

Valuation

In terms of trailing-12-month price/sales, TSLA has recently been trading at 19.76x, which is significantly higher than HMC, which has recently been trading at 0.41x. Also, its trailing-12-month ev/sales of 20.19x is 2522.1% higher than HMC’s 0.77x. So, HMC is the more affordable stock.

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