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Ford Stock Looks Cheap at 0.26X P/S - But is It Worth Buying?
Ford MotorFord Motor(US:F) ZACKSยท2025-06-23 14:10

Core Viewpoint - Ford is currently undervalued with a forward 12-month price-to-sales (P/S) ratio of 0.26, which is below industry levels and its own 5-year average, indicating potential investment opportunities despite recent stock performance [1][3][19] Valuation Comparison - Ford's P/S ratio of 0.26 is lower than General Motors' (GM) 0.27 and significantly lower than Tesla's (TSLA) 9.88, suggesting a favorable valuation compared to peers [1][8] - Despite a year-to-date stock increase of approximately 7%, Ford's valuation remains attractive compared to the industry's decline of over 19% [3][19] Growth Drivers - Ford Pro's strong demand and successful launch of the Super Duty are key catalysts for future earnings growth, supported by a growing number of paid software subscriptions [10][11] - The company has a robust liquidity position with around $45 billion in liquidity, including $27 billion in cash, which supports its investment priorities [11] - Ford's dividend yield of over 5% is appealing for income-focused investors, especially compared to the S&P 500's average yield of just over 1% [12] Challenges - The EV segment is facing significant losses, with a reported loss of $5.07 billion in 2024, driven by competition and high development costs [13] - The traditional internal combustion engine (ICE) business is expected to see reduced sales, impacting profitability [14] - Tariff-related challenges are projected to have a net negative impact of approximately $1.5 billion on adjusted EBIT in 2025 [15] Earnings Estimates - The Zacks Consensus Estimate indicates a year-over-year decline of 7% in sales and 40% in earnings for 2025 [16] - Recent revisions show a decrease in earnings estimates for the current quarter and upcoming periods, reflecting growing concerns about Ford's near-term performance [17] Conclusion - While Ford's stock appears cheap with a low P/S ratio and attractive dividend yield, the company faces headwinds in its EV and ICE segments, making the near-term outlook uncertain [19][20] - Existing investors may find reasons to hold due to the strong balance sheet and commitment to shareholder returns, while new investors may consider a wait-and-watch approach [20]