Ford's Extreme Leverage Makes It Anything But a Value Play

Ford Motor Company logged a 2.3% change Friday, and is now trading at a price of $11.88 per share.

Ford Motor Company returned losses of -16.7% last year, with its stock price reaching a high of $16.68 and a low of $10.61. Over the same period, the stock underperformed the S&P 500 index by -17.0%. As of April 2023, the company's 50-day average price was $12.19. Ford Motor Company develops, delivers, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide. Based in Dearborn, MI, the large-cap Consumer Discretionary company has 173,000 full time employees. Ford Motor Company has offered a 4.3% dividend yield over the last 12 months.

The Business Is Unprofitable and Its Balance Sheet Is Highly Leveraged:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $155,900 $127,144 $136,341 $158,057
Gross Margins 13.6% 11.3% 15.9% 15.0%
Operating Margins 6.4% 3.3% 7.2% 8.1%
Net Margins 0.03% -1.01% 13.16% -1.25%
Net Income(MM) $47 -$1,279 $17,937 -$1,981
Interest Cost -$9,712,000 -$9,806,000 -$6,794,000 -$7,139,000
Depreciation & Amort. -$8,490,000 -$7,457,000 -$5,960,000 -$6,493,000
Earnings Per Share $0.01 -$0.32 $4.45 -$0.49
EPS Growth n/a -3300.0% 1490.63% -111.01%
Diluted Shares (MM) 4,004 3,973 4,034 3,915
Free Cash Flow (MM) $10,007 $18,527 $9,560 -$13
Capital Expenditures (MM) -$7,632 -$5,742 -$6,227 -$6,866
Net Current Assets (MM) -$111,260 -$119,706 -$99,417 -$96,241
Current Ratio 1.16 1.2 1.2 1.2
Long Term Debt $101,361,000 $110,341,000 $88,400,000 $88,805,000
Net Debt / EBITDA 7.88 8.47 3.86 10.59

Ford Motor Company does not have a meaningful trailing P/E ratio since its earnings per share are currently in the red. Based on its EPS guidance of $1.65, the company has a forward P/E ratio of 7.4. In comparison, the average P/E ratio for the Consumer Discretionary sector is 22.33. On the other hand, the market is undervaluing Ford Motor Company in terms of its equity because its P/B ratio is 1.1. In comparison, the sector average is 3.12.

Ford Motor Company Has an Analyst Consensus of Some Upside Potential:

The 20 analysts following Ford Motor Company have set target prices ranging from $10.0 to $21.0 per share, for an average of $13.21 with a hold rating. As of April 2023, the company is trading -7.7% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Ford Motor Company has an average amount of shares sold short because 5.3% of the company's shares are sold short. Institutions own 52.7% of the company's shares, and the insider ownership rate stands at 0.18%, suggesting a small amount of insider investors. The largest shareholder is the Vanguard Group, Inc., whose 9% stake in the company is worth $3,987,450,592.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.