Ford Motor Co: Automotive industry impact & stock updates

In 1903, Henry Ford and eleven other investors established the Ford Motor Company, an American automaker. Ford Motor Company, which emerged at the end of the American Industrial Revolution and was driven by the dynamic spirit of Gilded Age capitalism, revolutionised the automotive industry by introducing the moving assembly line, an invention that would change the face of manufacturing globally, and producing in large quantities vehicles that were affordable for the general public.

With its headquarters located in Dearborn, Michigan, Ford has maintained its position as one of the leading auto brands in the country and globally, even after discontinuing Lincoln and Mercury in 2011. Ford Motor Company has shown a strong capacity for adaptation, even in the face of severe or protracted economic downturns, fluctuating customer demand, and technological advancements.

Ford Motor Co

Key Historical contributions

The assembly line in motion. The Ford moving assembly line was a significant advancement in manufacturing. It enabled the timely and effective mass production of goods by streamlining production, fostering gradual worker specialisation, and drastically lowering the time and cost of production.

The Model T, 1909

A mass-market vehicle was the Model T. The Ford Model T was a milestone in the history of transportation and the automobile industry, being the first mass-produced affordable car for the average American citizen. The Model T significantly increased geographical reach for both social and commercial purposes, democratised car ownership, revolutionised American travel, and generally established a mobile society.

Ford’s mass production techniques produced jobs both directly and indirectly very quickly. Employment peaked in the late 1970s at 256,000, having reached a peak of 100,000 in 1923. There was an especially wide range of work opportunities available to those classified as “unskilled labour.” When it was first put into effect in 1914, Ford’s $5 daily wage policy contributed to the rise of the American middle class.

The increased mobility in America changed practically every aspect of American life. The geographical scope of American society expanded as a result of the building of residences and businesses on the outer edges of cities and towns due to the ease of transportation and increased opportunity for commerce.

Reasons why Ford Motor (F) was upgraded to buy

Considering that Ford Motor Company (F) was recently upgraded to a Zacks Rank #2 (Buy), it might be a wise investment for investors. One of the main factors influencing stock prices is the rise in revenue estimates, which is reflected in this upgrade.

Fundamental to the Zacks rating system is a company’s evolving earnings picture. The Zacks Consensus Estimate, an average measure of EPS estimates from the sell-side analysts including the stock, is tracked by the system for the current and upcoming years.

Since it can be challenging to arrive at decisions based on assessing improvements by Wall Street analysts, the Zacks rating system is very helpful for individual investors because it can be a powerful indicator of changes in the earnings picture, which can impact short-term stock price movements. The majority of these are influenced by arbitrary factors that are difficult to observe and quantify instantly.

Therefore, Ford Motor’s Zacks rating increase is effectively a compliment on its earnings outlook, which may help its stock price.

In general, growing earnings forecasts and Ford Motor’s ensuing rating upgrade suggest that the company’s core operations are doing better. The stock should rise as a way for investors to express their gratitude for this positive business trend.

Which one is a buy? Ford or Tesla?

When searching for stocks in the automotive industry – residential sector, investors may want to take Tesla (TSLA) or Ford Motor Company (F) into consideration. However, which of the above stocks currently gives those seeking value a better return on their investment?

At the moment, Tesla is ranked #3 (Hold) and Ford Motor Company is ranked #2 (Buy) in the Zacks Rank system. Investors can feel confident that F has an improving earnings outlook because the Zacks Rank rewards stocks which have recently experienced positive changes to their earnings estimates. Value investors, however, will be concerned with much more than this.

Several tried-and-true valuation metrics that indicate when a business is overpriced at its current share price levels are also of interest to value investors.

By examining a range of important indicators, such as the well-known P/E ratio in addition to the P/S ratio, revenue yield, earnings per share, and several other fundamentals that value investors have long utilized, our Value category identifies undervalued businesses.

As of right now, TSLA has a forward P/E ratio of 70.88, whereas F’s is 6.17. Furthermore, we observe that F’s PEG ratio is 0.80. This number is comparable to the widely used P/E ratio, but the PEG ratio takes into account the anticipated rate of growth in a company’s earnings as well. As of right now, TSLA’s PEG ratio is 3.69.

The P/B ratio of 1.13 for F is another noteworthy valuation metric. The market value of a stock is compared to its book value, or total assets less total liabilities, in the P/B ratio. In contrast, the P/B for TSLA is 8.57.

F has an A value grade based on these and numerous other metrics, whereas TSLA has a F value grade.

Given that F has experienced more estimate modification activity and has more appealing valuation indicators than TSLA, it appears that value investors will decide that F is currently the better choice.

Is Ford’s 9.3% Return on Equity (ROE) concerning?

Although some investors may already be familiar with financial metrics, we’ll examine ROE in order to better understand Ford Motor Company (NYSE:F) through learning-by-doing.

Return on equity, or ROE, is a helpful metric for evaluating a company’s ability to make a profit on the capital that its shareholders have invested in it. Stated differently, it demonstrates the company’s ability to generate profits from the investments made by shareholders.

Comparing a company’s return on equity to the industry average is one easy way to see if it’s favourable. This approach’s drawback is that, regardless of the same industry category, some businesses differ significantly from one another. Ford Motor’s return on equity (ROE) is below the industry average of 18%.

This is not ideal. However, given that the company’s current debt levels are manageable, a lower ROE could still indicate that it has the chance to improve its returns through the use of leverage. Given the risk, you should avoid companies with high debt levels and low return on equity.

Ford Motor has an extraordinarily high debt to equity ratio of 3.48, suggesting that it uses a significant amount of debt to fund the company. It is concerning when a company has a relatively high debt to equity ratio but a relatively low return on equity.

Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

Поделиться: