On October 20, 2023, Ford Motor Co (F, Financial) recorded a 1.3% gain, bringing its stock price to $11.68. Despite a 3-month loss of 17.34%, the company boasts an Earnings Per Share (EPS) (EPS) of 1.02. The question that arises then is whether the stock is modestly undervalued? To answer this, we'll delve into a valuation analysis of Ford Motor Co (F).
Company Introduction
Ford Motor Co, a renowned automobile manufacturer, operates under the Ford and Lincoln brands. The company holds a market share of approximately 13% in the United States, 6.5% in Europe, and 2.1% in China, including unconsolidated affiliates. With a workforce of about 173,000 employees, including 57,000 UAW employees, Ford Motor Co is headquartered in Dearborn, Michigan. The company's present market cap is $46.70 billion, with the stock price being $11.68 per share, suggesting a modest undervaluation.
GF Value Summary
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on the summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GF Value calculation, Ford Motor Co (F, Financial) appears to be modestly undervalued. At its current price of $11.68 per share, Ford Motor Co has a market cap of $46.70 billion, indicating a potential undervaluation. Given this undervaluation, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Ford Motor Co has a cash-to-debt ratio of 0.3, which ranks worse than 66.97% of 1229 companies in the Vehicles & Parts industry. Based on this, GuruFocus ranks Ford Motor Co's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. Ford Motor Co has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $169.80 billion and Earnings Per Share (EPS) of $1.02. Its operating margin is 7.47%, which ranks better than 66.69% of 1264 companies in the Vehicles & Parts industry. Overall, GuruFocus ranks the profitability of Ford Motor Co at 6 out of 10, indicating fair profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Ford Motor Co is 0.4%, which ranks worse than 69.6% of 1204 companies in the Vehicles & Parts industry. The 3-year average EBITDA growth rate is -15.1%, which ranks worse than 84.99% of 1079 companies in the Vehicles & Parts industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Ford Motor Co's return on invested capital is 5.41, and its cost of capital is 7.35.
Conclusion
In conclusion, the stock of Ford Motor Co (F, Financial) gives every indication of being modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 84.99% of 1079 companies in the Vehicles & Parts industry. To learn more about Ford Motor Co stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
