The Razor’s Edge
2-Year Price History
Recent Price
(2/2/2009)
$1.88
52-Week Price
$1.01 – $8.79
Market Capitalization
$4.5 Billion
Most Recent Dividend
$0.00
About Ford Motor Company
Ford Motor Company is considered to operate in the Consumer Goods
sector. They specifically operate in the Automotive Manufacturers/Major
business segment contained within the Automotive industry.
The company is a producer of cars and trucks combined. Its business is divided into two sectors: Automotive and Financial Services.
A Word Of Caution
The Ockham Research Team has placed an alert on this security because there have been significant developments associated with Ford Motor Co (F). Eventually, these externalities may have an impact on our valuation but these recent events have not yet been fully factored into our analysis.
Of course, you may proceed to review our research report for this security, but please be aware that our model may not reflect these significant factors surrounding this company as our data sources are still being updated. This alert shall remain in effect until the situation surrounding this security normalizes substantially.
Therefore, (and as always), check additional sources and available information regarding F before making an investment decision.
Ockham’s Rating
At Ockham Research, we believe that there is extremely useful information to be gleaned from historical evidence. When a stock is out of line with historical norms it could definitely be a signal that it is overvalued or undervalued. But as proponents of the Efficient Market Hypothesis will tell you, the market is never wrong about stock prices because everything that can be known about a stock has already been priced in. However, in extreme cases, such as the Tech bubble in the early 2000’s or more recently the credit crisis demonstrates there are certainly times where historical evidence can be misleading. Episodes such as this do prove that times of great market correction either positive or negative can be driven by factors outside of fundamentals.
Well, what can you say about this market? No one likes to see the market going down so rapidly, but in times like these value investors should be cautiously opportunistic, as the market’s decline has certainly uncovered some great bargains. We are simply reiterating F’s Undervalued rating as of this week, as F’s sector has resisted the downturn to some extent. Our analysis of this stock is little changed since last week’s report, but please continue reading for further justification of our Undervalued rating.
First, an increase has occurred in F’s price from $1.80 as of 01/24/2009 to a price of $1.87 as of 01/31/2009. This increase of 3.89%, while not significant enough to cause a ratings downgrade at this time, does cause the attractiveness of F to decline slightly.
Second, since our last report, there have been no significant adjustments in earnings expectations or guidance.
F Stock Evaluation
We are reiterating our rating of Undervalued on F at this time. As described in the Recommendation Summary, we have not seen any additional guidance or change in expectations to F’s earnings, but we have seen a relatively significant increase in its share price of 3.89%. This increase in price is significant and should be noted as we look further into the fundamental picture of F below.
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 0.10x and the low end of the range at 0.05x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for F of 0.03x is well below its normal historic Price to Sales levels. At a price of $1.87, F is 61% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.
F Cash Earnings
Looking at F specifically in their Cash Earnings capabilities, Ockham views F as significantly below 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 1.52 and a 0.79 low over the same period.
Now that F’s current price is $1.87 and its Price to Cash Earnings ratio is 0.31, we are very positive on its outlook from the cash earnings perspective. In fact, F is now trading a full 74% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why F has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.
F Dividends
When determining a company’s future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn’t imperative for F to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. Because F is not currently paying a dividend we give them a neutral rating on the dividend portion of our analysis; however, be advised that because the company has a history of paying a dividend that means that the dividend has been discontinued. We are always cautious of a company that has discontinued paying a dividend as it generally suggests a financial weakness.
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RazorWire™ & Community Discussion
BUT
C’mon, that’s for Good leadership. GM, F, Chrysler are barely keeping up. Now they are all rushing to build electric cars when gas is back to $1.74 a gallon. They just don’t get it. Cut costs, cut the union, or go bankrupt. Simple.
7000 GM Dealers vs 1500 Toyota.
No wonder they have ahard time generating revnue with these type of fixed costs.