The EV industry, which already established itself as one the fastest growing segments, is set to soar even further with a Biden presidency. The pro climate change President-elect has laid out his plans to invest over $2 trillion across all industries to make the United States a clean energy economy.

While Tesla, Inc. (TSLA) is leading the change in the $5 trillion transportation industry by being the leading manufacturer of electric vehicles across the world, Ford Motor Company (F) is not far behind. In fact, as one of the top three automobile manufacturers in the United States, F stands to garner a higher market share relatively soon due to its economies of scale.

Also, as bilateral trade relations with China are likely to be restored under a Biden administration, the United States automotive industry, which relies on China for raw materials and processing, is expected to bounce back.

While TSLA’s impressive third quarter results have investors hooked, F’s new product news is also being perceived well in the market. F’s Mach-E, an all-electric crossover, is set to be launched this year, competing with TSLA’s Model Y.

TSLA has gained 174.4% over the last six months, while F returned 12.9%. However, in terms of past month performance, F is the clear winner with a 4.5% gain versus TSLA’s 3.9% return.

But which stock is a better buy now? Let’s find out.

Latest Developments

TSLA has become a red-hot stock after registering record profits for the fifth consecutive quarter (ended September 2020). The stock gained 3.3% in after-hours trading on October 21^st following the release of its financial results. TSLA CEO Elon Musk withdrew the fourth tranche of moonshot award following the impressive results, making him the largest gainer at $11.80 billion in the Bloomberg Billionaires Index.

The company is currently planning to launch three new electric vehicles in the near future, including the Tesla Cybertruck and 2 electric cars. TSLA is planning to invest up to $12 billion in electric vehicles and battery factories over the next two years, with manufacturing facilities in three continents. The company raised $4.97 billion through an at-the-market stock offering in September to fund its capital-intensive projects in the near future.

TSLA also joined the tequila business on November 7^th, launching its uniquely shaped tequila bottles through its official website, which sold out within hours.

TSLA recently entered into the solar roof business, with CEO Elon Musk expecting it to become the next “killer product” in 2021. Total solar deployments in the third quarter that ended September 2020, more than doubled sequentially to 57 MV, while solar roof deployments tripled over this period.

Moreover, TSLA is reportedly planning to launch its products in India in 2021. With a huge population and thereby market base, this expansion is expected to ramp up the profits for the company.

F is currently planning a structural readjustment to improve operational efficiency. The company plans to allocate capital to its strongest franchises to boost revenue. A similar move is also announced for its European counterpart, to capitalize from the pandemic driven boost in demand for automobiles.

Earlier in August, F launched the Ford F-150 truck, which is a redesigned and revamped version of its most popular truck in the United States.

Recent Financial Results

TSLA reported impressive results for the third quarter that ended September 2020, surpassing analyst expectations. Its EV deliveries increased 7% year-over-year (subject to operating lease accounting) over this period. Revenue increased 39% year-over-year to $8.77 billion, while gross profit rose 73% from the same period last year to $2.06 billion. Its net income and EPS rose 131% and 69%, respectively. TSLA’s EPS for this period beat the consensus estimate by 33.3%.

F’s units of vehicles sold in the third quarter that ended September 2020 increased 27.2% sequentially. F’s revenues increased slightly year-over-year to $37.50 billion over this period. Net income rose 500% from the year-ago value to $2.40 billion. F’s EPS grew 445.5% from the same period last year to $0.60, beating the street EPS estimates by 242.1%.

Past and Expected Financial Performance

TSLA’s total assets grew at a CAGR of 17.6% over the past three years, while F’s total assets increased at a CAGR of 1.1% over the same period.

Analysts expect TSLA’s EPS to rise 265.2% in the next quarter ending March 2021, 68.3% next year, and at a rate of 353.9% per annum over the next five years. Consensus revenue estimates indicate a 56.5% rise in the next quarter, and 44.7% growth next year.

F’s EPS is expected to grow 187% in the next quarter, 2,750% next year, and at a rate of 8.7% per annum over the next five years. Analysts estimate revenues to grow 14.8% in the next quarter, and by 22.2% next year.

Thus, TSLA has an edge over F here.

Profitability

F’s trailing 12-month revenue is 8.84 times what TSLA generates. However, TSLA is more profitable with a gross margin of 21.1% compared to F’s 5.8%. TSLA’s ROA of 2.7% is higher than F’s 2%. However, F’s ROE of 7.6% compares favorably with TSLA’s 5.6%.

Valuation

In terms of trailing 12-month price/sales, TSLA is currently trading at 14.02x, 5,741.7% more expensive than F, which is currently trading at 0.24x. TSLA is also more expensive in terms of trailing 12-month EV/Sales (14.54x versus 1.22x) and Price/ Cash flow (93.71x versus 1.37x).

Thus, F is a more affordable stock here.

POWR Ratings

F is rated a “Buy” in our proprietary POWR Ratings system, while TSLA is rated “Neutral”. Here’s how the four components of overall POWR Ratings are graded for both these stocks:

TSLA has a “C” for Trade Grade, Buy & Hold Grade, Peer Grade and Industry Rank. It is ranked #11 out of 32 stocks in the Auto & Vehicle Manufacturers industry.

F has an “A” for Trade Grade, “B” for Peer Grade, and “C” for Buy & Hold Grade and Industry Rank. It is currently ranked #5 in the same industry.

The Winner

While TSLA has been the industry leader for EV for quite some time now, it is facing severe competition. With a major internal structural and executive change in F, the company has realigned its targets to invest heavily in the technology, to reshape the company’s growth in tandem with industry demand. Already having access to some of the largest car markets in the world, combined with its large production capacity and brand loyalty, F’s products are likely to generate significant demand in the market, making it a better buy here.

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TSLA shares were trading at $433.38 per share on Monday afternoon, up $3.43 (+0.80%). Year-to-date, TSLA has gained 417.99%, versus a 13.90% 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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