F Investment Analysis Report & Stock Research, Ford Motor Company

Ockham's Rating/Recommendation Summary

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F Revenue

As a value investing shop, we are interested in seeing how F's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 0.17x and the low end of the range at 0.07x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for F of 0.32x is significantly above its historical average. This places F at the upper end of its historical range relative to sales per share and makes it difficult to suggest an attractive price outlook. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 166% merely to return F to its historical average.

F Cash Earnings

Looking at F specifically in their Cash Earnings capabilities, Ockham views F as significantly above its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for F to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 3.44 and a 1.52 low over the same period.

Therefore, at the current price of $10.91 and a Price to Cash Earnings ratio of 4.36, F is significantly overvalued. This diminishes the attractiveness of F until we see either a significant increase in cash earnings or a decline in price. A decline of the Price to Cash Earnings ratio of 76% is needed just to return to the historical cash earnings multiple.

F Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.