With a recent decline of 2.42% in its stock price and a modest 3-month loss of 1.38%, Ford Motor Co (F, Financial) presents a curious case for value investors. The company's Earnings Per Share (EPS) stands at 0.97, raising the question: is Ford modestly undervalued? This analysis delves into Ford's current valuation to provide investors with a clearer picture of its potential market value.
Company Introduction
Ford Motor Co, a stalwart in the automobile industry, operates under the Ford and Lincoln brands. In an innovative move in March 2022, Ford announced the separation of its combustion engine venture, Ford Blue, and its battery electric vehicle business, Ford Model e, although both remain under the Ford umbrella. Predominantly, Ford's sales in the U.S. contribute to about 66% of its total revenue, with the company boasting a significant market presence in the U.K. and a smaller footprint in China. With a workforce of approximately 177,000 employees, including around 59,000 UAW members, Ford's operational scope is vast, reflecting its $177.50 billion in sales and a market cap of $47.40 billion.
Understanding the GF Value
The GF Value is a proprietary measure indicating the intrinsic value of a stock, calculated by considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and estimated future business performance. For Ford, the GF Value is set at $15.37, suggesting that at its current price of $11.87, the stock is modestly undervalued. This valuation implies that Ford's stock price could potentially see an upward adjustment, aligning closer to its fair value, thus offering a promising future return for investors.
Financial Strength and Stability
Investing in companies with robust financial health reduces the risk of significant capital loss. Ford's cash-to-debt ratio stands at 0.23, which is lower than 71.44% of its peers in the Vehicles & Parts industry, indicating a weaker financial position. The company's overall financial strength has been rated 4 out of 10 by GuruFocus, suggesting that Ford's financial stability is not as strong as some of its competitors.
Profitability and Growth Prospects
Ford has maintained profitability over the past decade, with recent revenues reaching $177.50 billion and an operating margin of 2.58%, although this is lower than many of its industry counterparts. The company's growth metrics are also compelling, with an average annual revenue growth rate of 10.9%, positioning it well within its industry context. The balance between Ford's profitability and its growth potential plays a crucial role in its valuation.
Another critical financial metric is the comparison between the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). Currently, Ford's ROIC is 2.43%, below its WACC of 4.64%, indicating that the company is not generating adequate returns relative to its capital costs.
Conclusion
While Ford Motor Co (F, Financial) appears modestly undervalued according to the GF Value, the company faces challenges in terms of financial strength and capital return efficiency. However, its significant market presence and growth potential could make it an attractive option for value investors. For those considering an investment in Ford, or seeking similar opportunities, the GuruFocus High Quality Low Capex Screener offers a tool to discover high-potential stocks with robust financials and growth prospects.
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.
