Among many of life’s counter-intuitive facets, we find Ford. An automobile company that, in the last 15 years has pulled an average annual revenue of $148 billion, with an average annual net profit of the last four years coming out to a modest $2.4 billion. This is factoring in the huge losses F took in the Covid Pandemic, of course.
In light of the recent developments surrounding Tesla’s meteoric rise into a 1,141.58 price to earnings ratio, a debate has come to forefront of Ford as a company the keep in step with their competition. Many speculators have put their foot down on F as a stock that its going to see little to no growth before finally pattering out in the face of technological growth and dying out as a company in the next 30 years. Some have said the exact opposite.
In Terms of Speculation
I don’t think there’s much to fuss over, and I don’t think the two takes mentioned above (the death or boom of a company) need to be held by anyone of any rational mind. Ford, from my perspective, is a company that has stood the test of time and thrown many of its profits into regrowth and investment into tech. Its a company that’s known for its steady growth and solid dividend payments, and because recent events have temporarily thrown those norms out the window, the average consumer mindset has plagued the evaluations of the company. Their history has become less important than their present, and their present is a boring 28.61 PE, without the flash of GM or the innovation of Tesla, which is more looked at as an investment of energy and infrastructure that an an investment in the automobile industry (though, truly, it is all three).
Just this year, Ford announced an increased investment put into autonomous and electric vehicles, capping their funds in the sector at $29 billion, comparable to competitor General Motors’ pledge of $27 billion in the same sector.
Additionally, Ford has already put out an an all electric vehicle in the form of the Mustang Mach-E, which helped push February sales to an all time record, up 56% from the year before along with strong performances from the hybrid F-150.
If you want a good indication of the future of a company that doesn’t involve a crystal ball, taking a look at the products they provide, their performances on the market, and the way said company uses their profits to stimulate growth is your bread and butter for such a task. And its clear from the data above that Ford, even in a new market, is doing well in all three of those categories. Whether or not they’re the instigator of change seems, to me, to be an irrelevant factor. Its their infrastructure and commitment to adaptation that keeps Ford around, and during this time of uncertainty, when major players are unable to push the button on a full-on buy or sell call for F, buying into the company is a wise play for the long term.
As cyclical as the automobile industry is, there’s no element of speculation in calling the economy’s inevitable return to growth and confidence. Its better to already be in the market when its pessimistic than to be buying in when its optimistic, because at that point, you’ve likely missed the buss.
Ford’s wheels are beginning to turn once again, and the confidence of a buyer now will likely be paid back in the next two years with great growth and healthy dividend.