Is Ford Motor Company (F) Stock a Good Value?

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I’ll tell you right off the bat. The answer to whether Ford Motor Company (NYSE:F) is a good value is … well, maybe.

Ford F stock

I know that’s not the answer you want to hear. But there are a lot of factors to take into consideration when evaluating Ford stock, whether it be individually or relative to its peers. So it just won’t be a simple answer.

In my opinion, General Motors Company (NYSE:GM) stock is the better value when head-to-head with Ford. Of course, up against Tesla Motors Inc (NASDAQ:TSLA), F stock suddenly becomes extremely cheap at 0.33 times sales versus 5.75 times for Elon Musk’s wonderful business.

And that’s why ultimately, despite many metrics to determine it, value is subjective, not objective. You’ll never truly know a stock’s intrinsic value, which is what people like Warren Buffett use to determine a stock’s margin of safety.

Ford’s Position Says a Lot

But what you can do is examine Ford’s position within its three key markets of Europe, China and the U.S. compared to its peers.

Asking two questions about each of these markets, I’ll know how Ford’s business stacks up against the others. If it does well on these questions, the notion of good value takes care of itself.

  1. Is it growing in each of these markets, and if so, by how much?
  2. Who is growing faster and why?

Ford – Unit Sales by market

Market November 2016 Sales Growth 2016 YTD Sales Growth
Europe 78,792 2.1% 967,675 3.6%
China 124,113 17.0% 1.1M 10.7%
U.S. 197,574 5.2% 2.4M 0.04%

So, Ford is growing sales in each of these markets, although its year-to-date numbers in the U.S. leave a lot to be desired. Otherwise, I think Ford is doing a very good job in its three main markets.

GM – Unit Sales by market

Market November 2016 Sales Growth 2016 YTD Sales Growth
Europe 74,695 -1.1% 923,759 5.6%
China 371,740 7.0% 3.4M 8.5%
U.S. 197,609 7.9% 2.2M 1.6%

Fiat Chrysler – Unit Sales by market

Market November 2016 Sales Growth 2016 YTD Sales Growth
Europe 75,265 10.1% 918,634 14.2%
China N/M N/M N/M N/M
U.S. 160,827 -14.3% 2.0M 1.0%

On the second question of who’s growing more and why; that becomes a bit of a tricky issue.

As much as possible, I’ve tried to report the retail vehicle sales of each of the Big Three in these three main markets. However, each of the car companies has a particular way of reporting, or not reporting, a particular month’s unit sales and those year-to-date.

I challenge you to come up with a figure for Fiat Chrysler Automobiles NV (NYSE:FCAU) in China. Its annual report says it sold 139,000 vehicles in the country for the entire 2015, down 18.7% from 2014. What it has done in 2016, I really couldn’t say.

That’s really too bad, because FCAU is taking Ford and GM to the mat when it comes to their competition in Europe. And they’re not doing horribly in the U.S. where they’ve always been a distant third in the Motor City.

At a price-to-sales ratio of 0.1 and Sergio Marchionne at the helm, I do like FCAU as a potential deep value play.

If you look at the China and U.S. markets as one, Ford and GM are basically doing about the same in terms of growth with Ford winning in China and GM in the U.S.

Is Ford Stock Good Value?

As I said earlier, if I had to pick one of the two on a relative value basis, I’d go with GM. However, I’d say Ford is good value relative to its own historical valuation metrics.

The problem for me is that I’m skeptical of all car companies as investments. They require way too much capital for the profits they generate and the risks they present.

In the case of Ford, it’s committed to making lots of small cars in Mexico — it wants to move Ford Focus production from Michigan — because consumers don’t like to pay too much for smaller cars. If Trump decides to carry out his hate-on for Mexico, Ford’s going to get caught in the tariff crossfire.

But hey, if you want to own stock in a car company, you could do worse than Ford.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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