Brief Company Overview
Ford Motor Company designs and builds automobiles. They consist of both an automotive and financial division. A main component of the financial division is Ford Motor Credit Company LLC which provides vehicle financing.
The Analyst target can be used to provide grounding of other valuation techniques. Targets are often updated too late to be useful, but are usually not completely out to lunch. The analyst target is 18% above the Current price. This suggests significant mis-pricing of the security if nothing has changed since the target was released.
Graham ValueF shares are valued using 4 variations of Graham valuation that use different time tables for calculating EPS and EPS growth. There is a large discrepancy in the value produced by the 4 variations. This reflects the collapse, bailout, and subsequent recovery of the American auto industry. Leverage has remained consistent over the last 5 years making the shorter term averages more reliable. Additional corrections needed to make Graham valuations realistic are to predict what growth rates will fall to during the valley of a cyclical sales trend.
Relative ValueFor a Stock with an industry wide collapse and bailout in its recent history relative valuation techniques are not as useful or precise as for more stable companies and industries. They should not be ignored though as the security did trade at those ratios and may again. Ford's relative valuation range from 36% below the current share price to 9% above. Relative to its recent history Ford stock is overbought.
Intrinsic ValueIntrinsic valuations include discounted cash flow (DCF), Dividend discount model (DDM), and Earnings Power Value (EPV). The DCF model values the F at $29.86, suggesting it is largely undervalued. EPV values F at $24.78 implying an upside of 87%. The Dividend Growth Model values Ford at $35.97. The Dividend Growth model overvalues Ford based on the recent rate at which the dividend has grown. This is the dividend returning to its pre-automotive industry collapse level. The rate has increased at a rate that is not sustainable and payout ratio has grown appreciably.
Simple Moving Average
The current share price is above the 13 day Moving Average and the moving average is rising. These are both bullish signs.
The MACD provides 2 bullish indicators. It is above the 9-day moving average and the value is above 0.
On Balance Volume
The OBV indicator shows that a long tern sell-off has transitioned into short term buying.
Ford is currently undervalued valued based on simple intrinsic models. Being in a cyclic industry, and being over valued when comparing relative value to its historic numbers suggest that Ford and the auto industry are in the boom portion of the cycle and that potential investors would be prudent to watch out for the bust. The current yield of 4.54% is covered by current earnings which will provide a floor for the stock as long as the dividend remains covered. This stock passes the initial value screening process as the upside potential appears to outweigh the downside potential. Thorough worst case models need to be created to assess Ford's ability to maintain earnings and dividend coverage when the automotive cycles exits the boom period.
Technical indicators show that since hitting its 52 week low the stock has been in a bullish trend The stock should not be traded by value investors until worst case analysis has been performed and a floor value calculated.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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