Ford Motor Co (F, Financial) recently experienced a daily gain of 3.57%, despite a 3-month loss of -10.94%. With an Earnings Per Share (EPS) (EPS) of 1.02, the question arises: is the stock modestly undervalued? This article aims to answer this question by providing a thorough valuation analysis of Ford Motor Co. Read on to gain a deeper understanding of the company's financial performance and intrinsic value.
Company Introduction
Ford Motor Co, a prominent automobile manufacturer, operates under its Ford and Lincoln brands. With a market share of around 13% in the United States, 6.5% in Europe, and 2.1% in China, the company has a significant presence in the global automobile industry. As of 2022, the company's revenue was largely driven by its U.S. sales, contributing about 67% of the total revenue. The company's current stock price stands at $12.64 per share, while the GF Value, an estimation of fair value, is at $16.26.
GF Value Explained
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. 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.
For Ford Motor Co, the GF Value suggests that the stock is modestly undervalued. Considering its current price of $12.64 per share, the long-term return of Ford Motor Co's stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength can result in a high risk of permanent capital loss. Therefore, it is crucial to examine a company's financial strength before purchasing shares. Ford Motor Co has a cash-to-debt ratio of 0.3, which ranks worse than 67.07% of 1227 companies in the Vehicles & Parts industry. The overall financial strength of Ford Motor Co is 4 out of 10, indicating that its financial strength is poor.
Profitability and Growth
Investing in profitable companies typically carries less risk. Ford Motor Co has been profitable 8 years over the past 10 years. With an operating margin of 7.47%, it performs better than 66.96% of 1262 companies in the Vehicles & Parts industry. However, its growth ranks worse than 84.68% of 1077 companies in the same industry, with a 3-year average EBITDA growth rate of -15.1%.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) is another way to assess its profitability. Ford Motor Co's ROIC of 5.41 is lower than its WACC of 7.36 for the past 12 months.
Conclusion
In conclusion, Ford Motor Co (F, Financial) is estimated to be modestly undervalued. Despite its poor financial condition and slower growth compared to other companies in the Vehicles & Parts industry, its profitability is fair. For more detailed financial information about Ford Motor Co, you can check out its 30-Year Financials here.
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