To achieve average annual stock market performance of 9.0% over the next 6 years, Ford Motor shares will need to reach $22. To achieve Upper quartile performance, Ford Motor’s stock price will need to reach $26 by 2029. At the current price of $13, what is the market’s view of Ford Motor’s future operating performance?
Executive Summary
- Key Ford Motor characteristics: above average expected growth, average profitability, instability, and low financial strength. A big negative influence on Ford Motor’s valuation is its poor Profitability.
- Low valuation, average shareholder returns. Current valuation levels are below average relative to the Ford Motor Peer Group. Recent market returns have tracked the Ford Motor Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Ford Motor shares should reach a level of $44 by 2029 — an 25.2% per year total shareholder return. A 2029 stock price of $22 would reflect median performance and a price of $26 would be required to reach upper quartile performance.
- Ford Motor’s past growth is average. Historical growth has been average relative to the Ford Motor Peer Group and forecasted growth is relatively average. Revenue Growth has been superior. EPS Growth has lagged. Ford Motor’s historical income statement growth and balance sheet growth have diverged. Revenue growth has exceeded asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity. Ford Motor’s consensus growth expectations are in line with past growth.
- Profitability has been Ford Motor’s biggest valuation weakness. Pretax Margin, and Pretax ROA are group lagging. These factors have negatively affected market perceptions of Ford Motor. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Ford Motor’s risk profile is unfavorable. Overall variability has been relatively low with relatively low revenue variability, only average E.P.S. variability, and very high stock price volatility. Financial Strength is very low and earnings’ expectations are relatively high. The debt/capital ratio has risen.
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