Is Ford a Value Play After Electric Vehicle Expansion and 37.6% Year-to-Date Growth?

• Curious about whether Ford Motor is truly a value opportunity or just trading sideways? You're not alone. Many investors are looking to get to the bottom of what’s driving the company’s current price.
• The stock has seen strong momentum, up 3.5% in the past week and a striking 37.6% year-to-date. This suggests that sentiment around Ford is on the move.
• Recent news highlights Ford’s plans to accelerate development of electric vehicles and secure fresh battery supply deals, fueling expectations of long-term growth. Additionally, Ford’s recent investment in new production facilities has amplified buzz around its evolving business strategy.
• When it comes to valuation, Ford currently scores a solid 3 out of 6 on our value checks. This score is right in the middle and is certainly worth a deeper dive. We’ll break down how this score stacks up against different valuation approaches, and later, explore a perspective that could reveal even more.

Find out why Ford Motor's 28.2% return over the last year is lagging behind its peers.

Approach 1: Ford Motor Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) valuation estimates a company's worth by projecting its future cash flows and discounting them to today’s value. This approach provides a data-driven view of what the business could be worth based on realistic expectations rather than market hype.

For Ford Motor, the current Free Cash Flow stands at $11.7 Billion. Future analyst forecasts suggest the Free Cash Flow will decline to $7.3 Billion in 2027. Beyond that, Simply Wall St extrapolates a gradual decrease in annual Free Cash Flow, projecting it to be around $4.8 Billion by 2035. These estimates reflect Ford's shifting business priorities and expected industry headwinds as it invests in transformation.

Based on the 2 Stage Free Cash Flow to Equity model, the estimated intrinsic value of Ford shares is $11.69. With its current trading price positioned about 13.6% over this intrinsic value, the DCF calculation suggests Ford stock is somewhat overvalued relative to its projected cash flows.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Ford Motor may be overvalued by 13.6%. Discover 917 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Ford Motor.

Approach 2: Ford Motor Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a commonly used metric for valuing profitable companies because it compares the share price with the company’s profit. This measure is particularly relevant to Ford Motor since the company is steadily profitable and has an established earnings stream.

What counts as a "normal" or "fair" PE ratio depends on a company’s growth prospects and risk profile. Fast-growing companies typically have higher PE ratios, reflecting investor optimism about future profits, while riskier businesses or those with slower growth often trade at lower multiples.

Ford currently trades at 11.24 times earnings. For context, the average PE ratio in the Auto industry is 18.42 times, and the broader peer average stands at 26.00 times. At first glance, Ford appears attractively valued compared to its competitors.

However, Simply Wall St's “Fair Ratio” provides a more tailored perspective. Ford’s Fair PE Ratio is calculated to be 17.68 times, taking into account not just the company’s industry, profit margins and market cap, but also factors like expected earnings growth and unique risks. This method goes beyond the standard comparison to industry or peers and provides a more nuanced valuation benchmark.

When comparing Ford’s actual PE of 11.24 times to its Fair Ratio of 17.68 times, the stock appears underappreciated by the market relative to what would be expected given its fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Ford Motor Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives are a simple and powerful tool that let investors create their own story about a company by combining their perspective on Ford Motor’s future with concrete estimates for revenue, earnings, and profit margins, and then converting that story into a fair value. This approach links your view of the business with a financial forecast, helping you move beyond generic ratios and see how your conviction translates to a price. Narratives are available to everyone within Simply Wall St’s Community page and are used by millions of investors to make smarter buy and sell decisions by comparing their personal fair value to the current market price. What makes Narratives so useful is their dynamic nature, as they automatically update as new information, like the latest earnings or breaking news, is released. For example, some investors see Ford’s digital service expansion as driving long-term profitability and assign a high fair value, while others focus on risks from EV losses or supply disruptions and arrive at a lower estimate. Narratives make these perspectives transparent and actionable, empowering you to invest with clarity and confidence.

Do you think there's more to the story for Ford Motor? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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