Is Ford’s Share Price Justified After Canada Maintains Tariffs on U.S. Autos?

Thinking about whether to buy, hold, or move on from Ford Motor stock? You are far from alone. There is a lot to consider with this American icon, especially as it balances traditional car manufacturing with new investments in electric vehicles and global trade dynamics. In the last year, Ford shares have gained 13.7%. Looking at the past five years, that growth rises to over 124.3%. However, the journey has not been consistent, with a 3-year return at -4.3%, indicating that recent developments have presented both opportunities and challenges for investors.

A few headlines have recently drawn Wall Street’s attention. Despite most Ford vehicles being built domestically, tariffs from Canada and complications from international trade deals continue to create some headwinds. At the same time, Ford’s initiative to make EVs more affordable and efforts to strengthen its battery supply chain suggest its readiness to adapt and grow over the long term. These positive steps, even as the company manages significant graphite import duties, contribute to the view that Ford’s prospects remain dynamic.

For investors considering the stock’s potential, valuation is crucial. Ford currently scores a 3 out of 6 on our undervaluation checks, which means it comes up undervalued in half of the major categories. On paper, this suggests the stock could offer compelling value. However, as we will see, breaking down the different ways to assess Ford’s worth can reveal where the real opportunities or risks exist. Stay tuned until the end, as we will also explore one often overlooked approach to valuation that can matter greatly in volatile markets.

Why Ford Motor is lagging behind its peers

Approach 1: Ford Motor Cash Flows

The Discounted Cash Flow (DCF) model is a standard way to estimate what a company is really worth. It works by projecting Ford’s future cash flows and then discounting those amounts back to today’s value. This approach helps investors determine whether the stock appears cheap or expensive at the current price.

Ford’s latest twelve-month Free Cash Flow (FCF) stands at $10.0 billion. Looking ahead, analysts estimate FCF will end 2027 at about $5.9 billion. Further projections suggest FCF will slowly decline to roughly $4.0 billion by 2035. These long-term numbers combine analyst estimates for the first five years and then extend the outlook using reasonable assumptions for the following years.

Using this two-stage DCF approach, Ford’s fair value per share calculates to $9.98. When compared to its current trading price, this means Ford is about 17.6% overvalued according to the DCF model. In other words, the stock currently trades ahead of its fundamental cash flow value.

Result: OVERVALUED

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

Our DCF analysis suggests Ford Motor may be overvalued by 17.6%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: Ford Motor Price vs Earnings

For profitable companies like Ford Motor, the Price-to-Earnings (PE) ratio is a popular and meaningful valuation metric. This multiple gives investors a snapshot of what the market is willing to pay right now for $1 of the company’s earnings. Typically, faster-growing or lower-risk companies can support a higher PE, while slower-growing or riskier businesses usually trade at lower PEs.

Looking at Ford’s current PE ratio of 14.8x, it sits comfortably below the Auto industry average of 19.5x and well under the peer group average of 60.8x. This would initially suggest the stock trades at a discount to the broader sector and its direct competition.

However, there is a more nuanced benchmark to consider: Simply Wall St’s proprietary “Fair Ratio.” This Fair Ratio is set at 20.1x for Ford and goes beyond simple comparisons by factoring in the company’s unique growth outlook, profit margins, market cap, and the risks it faces. Unlike the industry or peer averages, the Fair Ratio is designed to reflect what investors should reasonably pay for Ford based on its specific mix of qualities.

When compared to its Fair Ratio, Ford’s actual PE of 14.8x sits well below what could be considered fair. This points to the stock being undervalued based on what investors might typically expect to pay for a company with Ford’s characteristics.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your Ford Motor Narrative

Earlier we mentioned there is an even better way to understand a company’s value, so let’s introduce you to Narratives. Narratives are a straightforward, accessible feature that empowers you to connect your perspective on a business—how you see its future growth, margins, and risks—to an actual financial forecast and a calculated fair value.

On the Simply Wall St Community page, millions of investors use Narratives to lay out their story for a company and share the numbers that back up that belief. Essentially, a Narrative links a company's business outlook and real-world news to the numbers behind its financial future, helping you see how your assumptions stack up against the current price and those of other investors.

Narratives are dynamic too. When new news, earnings, or industry shifts emerge, fair values and forecasts are immediately updated so you’re always looking at the most relevant view. By comparing a Narrative’s fair value to Ford’s share price, you can quickly see if others think it’s time to buy or sell, based on their story and calculations.

For example, among Ford investors, one of the most optimistic Narratives sees recurring digital revenues and new EV platforms boosting long-term profitability to justify a fair value of $16.0 per share. A more cautious perspective highlights rising labor costs and competitive challenges, estimating fair value at just $8.0.

Do you think there's more to the story for Ford Motor? Create your own Narrative to let the Community know!

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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