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Does Ford (F) Stock Make for a Suitable Value Investment?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Ford Motor Company (F - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Ford has a trailing twelve months PE ratio of 6.60. This level compares widely favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.18.
If we focus on the long-term trend of the stock the current level puts Ford’s current PE near its lows. The current PE is well below its median for the term (which stands at 9.66), and the number has been on a general downtrend since 2015. Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
Further, the stock’s PE also compares favorably with the Zacks classified Automotive - Domestic industry’s trailing twelve months PE ratio, which stands at 9.87. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
PS Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Ford has a P/S ratio of about 0.31. This is lower than the Zacks categorized Automotive - Domestic industry average, which comes in at 0.60 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
This clearly suggests some level of undervalued trading for F—at least compared to historical norms.
Broad Value Outlook
In aggregate, Ford currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Ford a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Ford is just 0.87, slightly lower than the industry average of 0.91. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at just 2.60, which is better than the industry average of 2.69.
Furthermore, the EV/EBITDA for Ford is just 3.98, a level that is far lower than the industry average of 12.07. The EV/EBITDA multiple (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) is capital structure-neutral, as it takes into account the level of debt on a company’s balance sheet, not just its equity. Since the Automotive - Domestic industry is highly capital-intensive, it makes sense to compare based on this ratio too.
Clearly, F is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Ford might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘C’. This gives F a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending down lately. Notably, the current quarter estimate has moved south by 20.5% over the last 60 days. Additionally, the full year estimate has seen six downward revisions and two upward revisions over the past 60 days, leading to a decline of 1.8%.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Ford is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 29% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
Notably, the Zacks classified Automotive – Domestic has underperformed the broader market over the past two years, as you can see below:
Despite such broad negative factors, the fact remains that Ford’s focus on product launches, global expansion plans, success of the One Ford plan as well as the development of its autonomous vehicle technology, provide a solid long-term outlook for the company. Moreover, the company has been paying dividends consistently since 2012, providing a strong boost to shareholder returns.
So, value investors might want to wait for analyst sentiment to turn bullish in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Does Ford (F) Stock Make for a Suitable Value Investment?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Ford Motor Company (F - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Ford has a trailing twelve months PE ratio of 6.60. This level compares widely favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.18.
If we focus on the long-term trend of the stock the current level puts Ford’s current PE near its lows. The current PE is well below its median for the term (which stands at 9.66), and the number has been on a general downtrend since 2015. Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
Further, the stock’s PE also compares favorably with the Zacks classified Automotive - Domestic industry’s trailing twelve months PE ratio, which stands at 9.87. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
PS Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Ford has a P/S ratio of about 0.31. This is lower than the Zacks categorized Automotive - Domestic industry average, which comes in at 0.60 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
This clearly suggests some level of undervalued trading for F—at least compared to historical norms.
Broad Value Outlook
In aggregate, Ford currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Ford a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Ford is just 0.87, slightly lower than the industry average of 0.91. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at just 2.60, which is better than the industry average of 2.69.
Furthermore, the EV/EBITDA for Ford is just 3.98, a level that is far lower than the industry average of 12.07. The EV/EBITDA multiple (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) is capital structure-neutral, as it takes into account the level of debt on a company’s balance sheet, not just its equity. Since the Automotive - Domestic industry is highly capital-intensive, it makes sense to compare based on this ratio too.
Clearly, F is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Ford might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘C’. This gives F a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending down lately. Notably, the current quarter estimate has moved south by 20.5% over the last 60 days. Additionally, the full year estimate has seen six downward revisions and two upward revisions over the past 60 days, leading to a decline of 1.8%.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Ford Motor Company Price and Consensus
Ford Motor Company Price and Consensus | Ford Motor Company Quote
This negative trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Ford is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 29% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
Notably, the Zacks classified Automotive – Domestic has underperformed the broader market over the past two years, as you can see below:
Despite such broad negative factors, the fact remains that Ford’s focus on product launches, global expansion plans, success of the One Ford plan as well as the development of its autonomous vehicle technology, provide a solid long-term outlook for the company. Moreover, the company has been paying dividends consistently since 2012, providing a strong boost to shareholder returns.
So, value investors might want to wait for analyst sentiment to turn bullish in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>