Ford Motor Company (F) is the 10th largest car manufacturer in the world. Known for its trucks, sports utility vehicles, and Lincoln luxury vehicles, the company operates through three segments: Automotive; Mobility; and Ford Credit. Shares of F are down 35% year-to-date and 13.9% over the past month to close Friday’s trading session at $14.16. The bearish investor sentiment can be attributed to bleak latest financial results and surging market volatility. The stock has been underperforming with respect to its peers. The Global X Autonomous & Electric Vehicles ETF (DRIV) fell 22.6% year-to-date, compared to F’s 35% decline.

The company’s net loss came in at $3.12 billion in the fiscal 2022 first quarter ended March 31, respectively, compared to a $3.26 million profit reported in the prior-year quarter. F reported a $5.40 billion mark-to-market loss on its Rivian investment. F has a 12% stake in the electric vehicle startup.

Here’s what could shape F’s performance in the near term:

Lower-Than-Industry Profit Margins

F’s trailing-12-month gross profit margin of 11.36% is 68.7% lower than the industry average of 36.2%. Its trailing-12-month EBITDA margin and levered free cash flow margin of 10.97% and 2.99% are significantly lower than the industry averages of 12.68% and 4.66%, respectively.

Click here to check out our Automotive Industry Report for 2022

Furthermore, F’s ROA and ROTC of 4.57% and 3.16% compared with industry averages of 6.09% and 7.71%, respectively. In addition, F’s trailing-12-month asset turnover ratio of 0.52% is 50% lower than the industry average of 1.05%.

Mixed Valuation

In terms of forward non-GAAP P/E, F is currently trading at 7.14x, 42.6% lower than the industry average of 12.44x. Its forward non-GAAP PEG multiple of 0.10 is 89.4% lower than the industry average of 0.94. Also, the stock’s forward Price/Book and Price/Cash Flow ratios of 1.12 and 6.40 compare with the industry averages of 2.43 and 9.98, respectively.

However, F’s forward EV/EBITDA ratio of 10.51 is 23.3% higher than the industry average of 8.52. Also, the stock’s forward EV/Sales multiple of 1.14 is 2.2% higher than the industry average of 1.12.

Consensus Rating and Price Target Indicate Potential Upside

Of the 15 Wall Street analysts that rated F, six rated it Buy, while seven rated it Hold, and two rated it Sell. The 12-month median price target of $20.29 indicates a 43.3% potential upside from Friday’s closing price of $14.16. The price targets range from a low of $13.00 to a high of $32.00.

POWR Ratings Reflect Uncertainty

F has an overall rating of C, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

F has a grade of C for Momentum and Growth. The stock is currently trading below its 50-day and 200-day moving averages of $16.29 and $16.96, respectively, indicating a downtrend, justifying the Momentum grade. In addition, F’s net income rose at a 55.3% CAGR over the past three years. However, the company’s revenues declined at a rate of 5.4% per annum over the past three years, in sync with the Growth grade.

Of the 69 stocks in the Auto & Vehicle Manufacturers industry, F is ranked #29.

Beyond what I’ve stated above, view F Ratings for Sentiment, Stability, Quality, and Value here.

Bottom Line

F has booked significant losses on its EV-startup investment, causing its profit margins to slump substantially. As the supply chain disruption and lithium production-related headwinds continue, F’s transition into becoming a major EV manufacturer is expected to be delayed. Thus, investors should wait until F’s production and profit margins improve before investing in the stock.

How Does Ford Motor (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, Isuzu Motors Limited (ISUZY), Volkswagen AG (VWAGY), and Jardine Cycle & Carriage Limited (JCYGY), which have a B (Buy) rating.

F shares were trading at $13.92 per share on Monday afternoon, down $0.24 (-1.69%). Year-to-date, F has declined -32.19%, versus a -13.79% 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. More...

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