Why Current F Stock Valuation Shows Ford is a Buy

Company Overview: Ford Motor Company designs, manufactures, markets, and services a range of Ford trucks, cars, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles worldwide. It operates through three segments: Automotive, Mobility, and Ford Credit. The Automotive segment sells Ford and Lincoln vehicles, service parts, and accessories through distributors and dealers, as well as through dealerships to commercial fleet customers, daily rental car companies, and governments.  Investment Information: Competition: In order to undergo a comparable analysis (to determine F's value), we need to first outline who F's competitors are. These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to F, and have a market cap similar to F (if possible). By keeping this in mind, I found the following list of companies to be some of F's closest competitors: GM, TJX, STLA, RACE, CCZ, HMC, NIO, APTV, CPNG, CMG Financial Information: Yearly: Revenues: In FY 2020, F experienced a yearly decrease in revenues of $-28.76B (or -18.45%) resulting in a total revenue figure of $127.14B. Cost of Revenues: In FY 2020, F experienced a yearly decrease in their cost of revenues of $-21.94B (-16.29%), resulting in a total revenue figure of $112.75B. Since the decrease (of -16.29%), in F's cost of revenue was greater (by 2.16%) than the decrease (of -18.45%) in F's revenues, we should expect that F experienced an decrease (roughly -2.16%) in their FY gross profits. Gross Profit: In FY 2020, F experienced a yearly decrease in their gross profit of $-6.82B (or -32.14%) resulting in a total gross profit of $14.39B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY. EBITDA: In FY 2020, F experienced a yearly decrease in their EBITDA of $-1.74B (or -9.49%) resulting in a total EBITDA of $16.59B. This decrease (of -9.49%) stems from the fact that F experienced a decrease in their gross profits of -32.14% (as we saw in the previous bullet point). Net Income: In FY 2020, F experienced a yearly decrease in their net income of $-1.33B (or -2,821%) resulting in a total net income of $-1.28B. EPS: As a result of F's decrease in net income of $-1.33B, F's EPS also decreased (by $-0.33) from $0.01 in FY 2019 to $-0.32 in FY 2020. Overall, F had a very poor financial performance in 2021. However, it may be a little blown out of proportion (in terms of the % changes) as F net income tends to fluctuate around 0, which can make their net income decrease rate something like -2800% as it decreased from $0.03B to -$1.28B. Quarterly: Revenues: In Q3 2021, F experienced a quarterly increase in revenues of $8.93B (or 33.38%) resulting in a total revenue figure of $35.68B. Cost of Revenues: In Q3 2021, F experienced a quarterly increase in their cost of revenues of $7.15B (31.23%), resulting in a total revenue figure of $30.06B. Since the increase (of 31.23%), in F's cost of revenue was lesser (by -2.15%) than the increase (of 33.38%) in F's revenues, we should expect that F experienced an increase (roughly 2.15%) in their Q3 gross profits. Gross Profit: In Q3 2021, F experienced a quarterly increase in their gross profit of $1.78B (or 46.21%) resulting in a total gross profit of $5.63B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q3 and Q2. EBITDA: In Q3 2021, F experienced a quarterly increase in their EBITDA of $1.82B (or 53.99%) resulting in a total EBITDA of $5.19B. This increase (of 53.99%) stems from the fact that F experienced a increase in their gross profits of 46.21% (as we saw in the previous bullet point). Net Income: In Q3 2021, F experienced a quarterly increase in their net income of $1.27B (or 226.56%) resulting in a total net income of $1.83B. EPS: As a result of F's increase in net income of $1.27B, F's EPS also increased (by $0.32) from $0.14 in Q2 2021 to $0.46 in Q3 2021 Overall, it seems as though F had a great quarterly financial performance (due to EPS $0.32) as many of their financial metrics grew, most notably their EPS (by $0.32), as well as their net income (by $1.27B), and other metrics (as you can tell from the above bullet points). However, F beat their EPS estimate by $0.01(or 2.7%), as they reported an EPS of $0.38or the quarter (compared to their estimated EPS of $0.37). Share Dilution: As part of their Q3 2021 earnings release, F stated that they currently have 4B Shares Outstanding (weighted average), which is up 3M shares (from 3.99B shares outstanding in Q2 2021). This is essentially negligible and should not be cause for any concern. Furthermore, F has up to 36M of shares that they can issue (thereby diluting F's stock). This maximum dilution for the period would only have a dilutionary effect on F of 1.03%, which is a bit more worrisome, but still likely not going to be a big issue. This is something to just keep in mind rather than something to deter investors from F stock. Analyst Ratings: Here is the current analyst rating distribution for F. In total there are 31 F analyst ratings. 19 Buys 8 Holds 4 Sells Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if F is a buy or sell Stock Grade: Currently, we have 3 financial ratings that help investors get a general idea of a company's valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate. Firstly, F has a DCF rating of 5 - Very Strong, which is considered to be Very Bullish. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating. Secondly, F has an ROE rating of 3 - Neutral, this is considered to be average. F's current ROE is 8.45%, which do not justify their rank of 3 - Neutral (should potentially be higher). ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently (19%). F stock's rank of 3 is justified due to their ROE being well under that of the industry average of 19%. Lastly, F has a P/E rating of 4 - Strong, this is considered to be Bullish. F's current price to earnings is 30.36 which justifies their rank of 4 - Strong. Price to Earnings is the most commonly found financial metric and is best used when comparing a company's p/e to the industry average. F operates in the Auto Manufacturers industry, which currently has an average P/E of 25. Overall, based on the 3 previously mentioned fields, F has been given a comprehensive rating of 5 - Very Strong. This rating implies that they are Very Stable financially. This stock grade analysis indicates that F is very healthy financially and is potentially a great candidate for a long term investment. F Stock Valuation: Ratings: As we know, F has been given an overall stock rating of 5 - Very Strong. This implies that F is sound fundamentally and is a good candidate for being “undervalued”. With this in mind, let's proceed. Comparable Analysis: Price to Book (P/B): F's current P/B ratio is 2.36, compared to the average P/B ratio of F's peers being 8.4. This implies that F is undervalued, and their share price should change by a factor of 255.3% to be at fair value (based on F's P/B compared to the P/B of their peers). This may be overdone due to the fact that F is a legacy automaker with a low P/E and some of their competitors are new, EV automakers with excessive evaluations (ie. NIO) Price to Equity (P/E): F's current P/E ratio is 30.36, compared to the average P/E ratio of F's peers being 25.16. This implies that F is overvalued, and their share price should change by a factor of -17.13% to be at fair value (based on F's P/E compared to the P/E of their peers). Overall, F is undervalued and needs to experience a change in stock price of (an average of) 119.08% to be considered “at fair value”. My Final Thoughts on F: Overall, due to the overall stock rating of 5 - Very Strong (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that F was undervalued and need to experience a price change of 119.08% in order to be at their fair value, I have concluded the following: Based off of an overall look at F's financials (encompassing all of P/E, P/B, ROE, FCF Yield, and DCF) I think it is safe to say that F is a very good investment candidate and is not likely to experience fianancial problems.

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Why Current F Stock Valuation Shows Ford is a Buy

bullish

general Analysis

[6 min Read]

Company Overview:

Ford Motor Company designs, manufactures, markets, and services a range of Ford trucks, cars, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles worldwide. It operates through three segments: Automotive, Mobility, and Ford Credit. The Automotive segment sells Ford and Lincoln vehicles, service parts, and accessories through distributors and dealers, as well as through dealerships to commercial fleet customers, daily rental car companies, and governments.

Investment Information:

Competition:

In order to undergo a comparable analysis (to determine F's value), we need to first outline who F's competitors are.

These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to F, and have a market cap similar to F (if possible).

By keeping this in mind, I found the following list of companies to be some of F's closest competitors:

GM, TJX, STLA, RACE, CCZ, HMC, NIO, APTV, CPNG, CMG

Financial Information:

Yearly:

  • Revenues: In FY 2020, F experienced a yearly decrease in revenues of $-28.76B (or -18.45%) resulting in a total revenue figure of $127.14B.
  • Cost of Revenues: In FY 2020, F experienced a yearly decrease in their cost of revenues of $-21.94B (-16.29%), resulting in a total revenue figure of $112.75B. Since the decrease (of -16.29%), in F's cost of revenue was greater (by 2.16%) than the decrease (of -18.45%) in F's revenues, we should expect that F experienced an decrease (roughly -2.16%) in their FY gross profits.
  • Gross Profit: In FY 2020, F experienced a yearly decrease in their gross profit of $-6.82B (or -32.14%) resulting in a total gross profit of $14.39B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY.
  • EBITDA: In FY 2020, F experienced a yearly decrease in their EBITDA of $-1.74B (or -9.49%) resulting in a total EBITDA of $16.59B. This decrease (of -9.49%) stems from the fact that F experienced a decrease in their gross profits of -32.14% (as we saw in the previous bullet point).
  • Net Income: In FY 2020, F experienced a yearly decrease in their net income of $-1.33B (or -2,821%) resulting in a total net income of $-1.28B.
  • EPS: As a result of F's decrease in net income of $-1.33B, F's EPS also decreased (by $-0.33) from $0.01 in FY 2019 to $-0.32 in FY 2020.

Overall, F had a very poor financial performance in 2021. However, it may be a little blown out of proportion (in terms of the % changes) as F net income tends to fluctuate around 0, which can make their net income decrease rate something like -2800% as it decreased from $0.03B to -$1.28B.

Quarterly:

  • Revenues: In Q3 2021, F experienced a quarterly increase in revenues of $8.93B (or 33.38%) resulting in a total revenue figure of $35.68B.
  • Cost of Revenues: In Q3 2021, F experienced a quarterly increase in their cost of revenues of $7.15B (31.23%), resulting in a total revenue figure of $30.06B. Since the increase (of 31.23%), in F's cost of revenue was lesser (by -2.15%) than the increase (of 33.38%) in F's revenues, we should expect that F experienced an increase (roughly 2.15%) in their Q3 gross profits.
  • Gross Profit: In Q3 2021, F experienced a quarterly increase in their gross profit of $1.78B (or 46.21%) resulting in a total gross profit of $5.63B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q3 and Q2.
  • EBITDA: In Q3 2021, F experienced a quarterly increase in their EBITDA of $1.82B (or 53.99%) resulting in a total EBITDA of $5.19B. This increase (of 53.99%) stems from the fact that F experienced a increase in their gross profits of 46.21% (as we saw in the previous bullet point).
  • Net Income: In Q3 2021, F experienced a quarterly increase in their net income of $1.27B (or 226.56%) resulting in a total net income of $1.83B.
  • EPS: As a result of F's increase in net income of $1.27B, F's EPS also increased (by $0.32) from $0.14 in Q2 2021 to $0.46 in Q3 2021

Overall, it seems as though F had a great quarterly financial performance (due to EPS $0.32) as many of their financial metrics grew, most notably their EPS (by $0.32), as well as their net income (by $1.27B), and other metrics (as you can tell from the above bullet points).

However, F beat their EPS estimate by $0.01(or 2.7%), as they reported an EPS of $0.38or the quarter (compared to their estimated EPS of $0.37).

Share Dilution:

As part of their Q3 2021 earnings release, F stated that they currently have 4B Shares Outstanding (weighted average), which is up 3M shares (from 3.99B shares outstanding in Q2 2021). This is essentially negligible and should not be cause for any concern.

Furthermore, F has up to 36M of shares that they can issue (thereby diluting F's stock). This maximum dilution for the period would only have a dilutionary effect on F of 1.03%, which is a bit more worrisome, but still likely not going to be a big issue. This is something to just keep in mind rather than something to deter investors from F stock.

Analyst Ratings:

Here is the current analyst rating distribution for F. In total there are 31 F analyst ratings.

  • 19 Buys
  • 8 Holds
  • 4 Sells

Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if F is a buy or sell

Stock Grade:

Currently, we have 3 financial ratings that help investors get a general idea of a company's valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate.

Firstly, F has a DCF rating of 5 - Very Strong, which is considered to be Very Bullish. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating.

Secondly, F has an ROE rating of 3 - Neutral, this is considered to be average. F's current ROE is 8.45%, which do not justify their rank of 3 - Neutral (should potentially be higher). ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently (19%). F stock's rank of 3 is justified due to their ROE being well under that of the industry average of 19%.

Lastly, F has a P/E rating of 4 - Strong, this is considered to be Bullish. F's current price to earnings is 30.36 which justifies their rank of 4 - Strong. Price to Earnings is the most commonly found financial metric and is best used when comparing a company's p/e to the industry average. F operates in the Auto Manufacturers industry, which currently has an average P/E of 25.

Overall, based on the 3 previously mentioned fields, F has been given a comprehensive rating of 5 - Very Strong. This rating implies that they are Very Stable financially. This stock grade analysis indicates that F is very healthy financially and is potentially a great candidate for a long term investment.

F Stock Valuation:

Ratings:

As we know, F has been given an overall stock rating of 5 - Very Strong. This implies that F is sound fundamentally and is a good candidate for being “undervalued”. With this in mind, let's proceed.

Comparable Analysis:

  1. Price to Book (P/B): F's current P/B ratio is 2.36, compared to the average P/B ratio of F's peers being 8.4. This implies that F is undervalued, and their share price should change by a factor of 255.3% to be at fair value (based on F's P/B compared to the P/B of their peers). This may be overdone due to the fact that F is a legacy automaker with a low P/E and some of their competitors are new, EV automakers with excessive evaluations (ie. NIO)
  2. Price to Equity (P/E): F's current P/E ratio is 30.36, compared to the average P/E ratio of F's peers being 25.16. This implies that F is overvalued, and their share price should change by a factor of -17.13% to be at fair value (based on F's P/E compared to the P/E of their peers).

Overall, F is undervalued and needs to experience a change in stock price of (an average of) 119.08% to be considered “at fair value”.

My Final Thoughts on F:

Overall, due to the overall stock rating of 5 - Very Strong (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that F was undervalued and need to experience a price change of 119.08% in order to be at their fair value, I have concluded the following:

Based off of an overall look at F's financials (encompassing all of P/E, P/B, ROE, FCF Yield, and DCF) I think it is safe to say that F is a very good investment candidate and is not likely to experience fianancial problems.

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F

Ford Motor Company

11.27

-0.05
-0.44%

Return

-12.32%
Change % Since Posting
-1.58
Change Since Posting
12.85
Price When Posted

Metrics

14.70
Target Price
9/ 10
Confidence
1-3 Years
Timeframe
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