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Ford Motor Company Valuation – November 2016 $F

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Ford Motor Company (F) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ford Motor Company (Ford) is a global automotive and mobility company. The Company’s principal business includes designing, manufacturing, marketing, financing, and servicing a line of Ford cars, trucks, sports utility vehicles (SUVs), and electrified vehicles, as well as Lincoln luxury vehicles. The Company operates in two sectors: Automotive and Financial Services. The Automotive sector includes North America, South America, Europe, Middle East & Africa, and Asia Pacific segments. Its Financial Services sector includes Ford Credit and Other Financial Services segments. Its vehicle brands include Ford, Ford-Lincoln and Lincoln. The Other Financial Services segment includes holding companies, real estate, and the financing of some Volvo vehicles in Europe. The Company has over 70 plants across the world. Through its wholly owned subsidiary Ford Motor Credit Company LLC (Ford Credit), it provides automotive financing products to and through automotive dealers throughout the world.

F Chart

F data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

moderngraham-valuation-of-f-november-2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $50,487,687,680 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.16 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -154.27% Fail
6. Moderate PEmg Ratio PEmg < 20 7.68 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.55 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.16 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.28 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

f-value-chart-november-2016

EPSmg $1.59
MG Growth Estimate -1.74%
MG Value $8.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $23.08
MG Value based on 0% Growth $13.53
Market Implied Growth Rate -0.41%
Current Price $12.23
% of Intrinsic Value 152.92%

Ford Motor Company does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.8 in 2012 to an estimated $1.59 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 0.41% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ford Motor Company revealed the company was trading below its Graham Number of $17.3. The company pays a dividend of $0.6 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 7.68, which was below the industry average of 17.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.99.

Ford Motor Company receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

f-charts-november-2016

Net Current Asset Value (NCAV) -$24.99
Graham Number $17.30
PEmg 7.68
Current Ratio 1.16
PB Ratio 1.55
Current Dividend $0.60
Dividend Yield 4.91%
Number of Consecutive Years of Dividend Growth 5

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $103,515,000,000
Total Current Liabilities $89,188,000,000
Long-Term Debt $89,951,000,000
Total Assets $234,963,000,000
Intangible Assets $0
Total Liabilities $203,479,000,000
Shares Outstanding (Diluted Average) 4,000,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.66
Dec2015 $1.84
Dec2014 $0.31
Dec2013 $2.94
Dec2012 $1.41
Dec2011 $4.94
Dec2010 $1.66
Dec2009 $0.86
Dec2008 -$6.50
Dec2007 -$1.38
Dec2006 -$6.72
Dec2005 $0.77
Dec2004 $1.52
Dec2003 $0.13
Dec2002 $0.51
Dec2001 -$3.02
Dec2000 $2.30
Dec1999 $5.86
Dec1998 $17.76
Dec1997 $3.58
Dec1996 $2.32

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.59
Dec2015 $1.80
Dec2014 $1.94
Dec2013 $2.62
Dec2012 $1.80
Dec2011 $1.30
Dec2010 -$1.15
Dec2009 -$2.57
Dec2008 -$3.67
Dec2007 -$1.89
Dec2006 -$1.68
Dec2005 $0.55
Dec2004 $0.39
Dec2003 $0.27
Dec2002 $1.79
Dec2001 $3.39
Dec2000 $6.51

Recommended Reading:

Other ModernGraham posts about the company

Dividend Investors Should Research These 10 Stocks – July 2016
Benjamin Graham Would Love These 10 Companies Today
10 Low PE Stocks for the Enterprising Investor – July 2016
10 Companies for Enterprising Dividend Investors – June 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016

Other ModernGraham posts about related companies

Advance Auto Parts Inc Valuation – November 2016 $AAP
General Motors Company Valuation – November 2016 $GM
Delphi Automotive PLC Valuation – August 2016 $DLPH
Carmax Inc Valuation – August 2016 $KMX
BorgWarner Inc Valuation – August 2016 $BWA
Ford Motor Company Valuation – August 2016 $F
O’Reilly Automotive Inc Valuation – July 2016 $ORLY
Genuine Parts Co Valuation – July 2016 $GPC
Johnson Controls Inc Valuation – July 2016 $JCI
Goodyear Tire & Rubber Co Valuation – July 2016 $GT

Disclaimer:

The author held a long position in Ford Motor Company (F) but did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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