Five companies with high capital expenditures (CAPEX) include Tesla Motors, General Motors, Apple Computer, Nike and Facebook. The capital expenditures of these five companies from different industries are compared using the CAPEX to sales ratio and free cash flow to CAPEX ratio.
For fiscal year 2013, Tesla Motors had a CAPEX to sales ratio of 13.12% and a free cash flow to CAPEX ratio of -2.36%.
For fiscal year 2013, General Motors had a CAPEX to sales ratio of 25.01% and a free cash flow to CAPEX ratio of 28.62%.
For fiscal year 2014, Apple Inc. had a CAPEX to sales ratio of 22.72% and a free cash flow to CAPEX ratio of 523.87%.
For fiscal year 2014, Nike, Inc. had a CAPEX to sales ratio of 25.01% and a free cash flow to CAPEX ratio of 240.91%.
For fiscal year 2013, Facebook had a CAPEX to sales ratio of 42.52% and free cash flow to CAPEX ratio of 209.99%.
Tesla Motors and General Motors are both automobile manufacturers, but their businesses are so different that they may as well be involved in different industries. Of all the companies on this list, the CAPEX spending of Tesla Motors is the most intensive. When considering CAPEX to sales, Tesla Motors' 13.12% does not seem especially high. Indeed, General Motors' CAPEX to sales is almost twice as high and almost 40 times larger when viewed as a net dollar figure ($264.22 million for Tesla Motors and $9.819 billion for General Motors). However, when considered using free cash flow to CAPEX, Tesla Motors has a ratio of -2.36. General Motors' free cash flow to CAPEX is 28.62%, showing that Tesla Motors has dedicated all of its operating cash flow to CAPEX spending, while General Motors still has a significant amount of free cash flow left after CAPEX spending.
Reasons for this difference can be explained by looking at Tesla Motors' position as the first major manufacturer of electric cars; all product designs, factories, production plans, suppliers and all other necessities of business have been created from scratch. General Motors is over 100 years old and invests significantly in its infrastructure, as is revealed by its high net level of CAPEX. However, when comparing the amount of free cash flow that General Motors dedicates to CAPEX spending proportionate to its business, this amount is significantly less.
With 22.72% of sales being dedicated to CAPEX spending, Apple Inc. certainly invests a great deal in its infrastructure. However, the company has a high level of free cash flow available compared to its CAPEX spending, indicated by a high free cash flow to CAPEX ratio of 523.87%.
Facebook dedicated 42.52% of its sales on CAPEX spending in 2013. This amount is quoted as being double the rest of the Internet advertising market combined. Facebook is aggressively expanding its capacity with plans for moving into emerging markets.
Nike, Inc. is a mature business that continues to grow. With CAPEX spending at 11.02% of its sales, the company obviously takes the maintenance and expansion of its capital infrastructure seriously. Nike, however, does not dedicate as much of its resources to CAPEX as other companies, such as Tesla Motors, General Motors and Facebook.