Ford Motor Company (F) in Dearborn, Mich., is a Legacy automobile manufacturer that operates in three segments: Automotive; Mobility; and Ford Credit.
The company has emerged as a competitor to Tesla, Inc. (TSLA) by launching three electric vehicles last year and is set to launch five additional electric vehicles this year.
F’s shares have gained 151.7% in price over the past year and 52.3% over the past three months, reflecting positive investor sentiment as the company enters the EV space.
So, here is what could shape F’s performance in the near term:
Electrification Strategy
F plans to invest $2 billion over the next three years (through 2025) to launch electric versions of its iconic vehicles, such as its Mustang automobile, F-150 truck, and Transit van. The company is currently targeting the market for fully electric commercial vans and pickups. It has already launched its electric Mustang and E-Transit and is scheduled to launch its electric F-150 Lightning this spring.
In addition, F has the most extensive public charging network in North America, with more than 63,000 charging plugs and counting. F also has a network of more than 2300 EV-certified dealers across the country and 644 EV-certified commercial vehicle centers.
Furthermore, F has invested $500 million in EV start-up Rivian, which will develop and sell all-electric vehicles in the European market beginning 2023.
Stable Growth Prospects
Analysts expect F’s revenues to increase 8% in the about-to-be-reported quarter (ended December 2021), 9.5% in fiscal 2021, and 13.9% in the current year. The consensus EPS estimates indicate a 17.6% rise in its fiscal 2021 fourth quarter, 363.4% improvement last year, and 4.7% growth in 2022. Furthermore, the Street expects F’s EPS to improve at a 77.7% CAGR over the next five years.
However, analysts expect F’s revenues and EPS to fall 0.4% and 44.9%, respectively, year-over-year to $33.41 billion and $0.49 in the current quarter (ending March 2022).
Mixed Valuation
In terms of forward non-GAAP P/E, F is currently trading at 10.96x, which is 27% lower than the 15.02x industry average. Its 0.19 forward non-GAAP PEG multiple is 81% lower than the 0.98 industry average. In addition, F’s forward Price/Sales and Price/Book multiples of 0.65 and 2.21, respectively, compare favorably with the 1.22 and 3.47 industry averages.
However, the stock’s forward EV/EBITDA and EV/Sales ratios of 15.14 and 1.56, respectively, are 43.1% and 1.4% higher than the 10.58 and 1.42 industry averages. Also, its forward 13.06 Price/Cash Flow multiple is marginally higher than the 12.88 industry average.
Consensus Rating and Price Target Indicate Marginal Downside
Of 16 Wall Street analysts that rated F, nine rated it Buy, four rated it Hold, and three rated it Sell. The 12-month median price target of $19.73 indicates a 9.4% potential downside from yesterday’s closing price of $21.77. The price targets range from a low of $12.00 to a high of $25.00.
POWR Ratings Reflect Uncertainty
F has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
F has a C grade for Momentum and Quality. The stock is currently trading below its 50-day and 200-day moving averages of $19.43 and $15.03, respectively, indicating a downtrend in sync with its Momentum grade. In addition, F’s trailing-12-month net income margin and ROE of 2.13% and 8.22%, respectively, are significantly lower than the 6.56% and 17.23% industry averages, justifying its Quality grade.
Of 66 stocks in the Auto & Vehicle Manufacturers industry, F is ranked # 19.
In addition to the grades I have highlighted, view F ratings for Growth, Stability, Value, and Sentiment here.
Click here to checkout our Electric Vehicle Industry Report for 2022
Bottom Line
With an impressive pipeline, F is poised to become a leading player in the EV industry over the long run. Its affordable price point should allow it to compete with the largest EV manufacturer TSLA. However, we think investors should wait until the ongoing semiconductor shortage eases and F’s profit margins improve before investing in the stock.
How Does Ford Motor Company (F) Stack Up Against its Peers?
While F has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Daimler AG (DDAIF) and Mazda Motor Corporation (MZDAY), which have an A (Strong Buy) rating.
F shares were trading at $23.88 per share on Tuesday morning, up $2.11 (+9.69%). Year-to-date, F has gained 14.97%, versus a 0.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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