It has been noted since the January 2014 pullback that major American automakers Ford (F -0.14 (-0.94%)) and General Motors (GM -0.58 (-1.62%)), may have become under priced [F&GM APIR, AFATTCTTR]. Ford and GM had dropped 11% and 9% respectively in the recent pullback, compared to a 5+% loss for the Dow. It seems that investor's have not forgotten the disastrous effects of the 2008 financial crash and ensuing panic on America's automakers. As the world worries about prospects for future growth money is pouring out of big automakers and into safer investments, creating big losses for the companies and potential opportunities for investors who are able to see through the fear. At present we will examine Ford, the biggest looser of the two, to decide whether or not it represents a sound value investment at this point in time.
Let's take a look at the data:
Ford Motor Co. 14.73 -0.14 (-0.94%)
52 Week High/Low: 12.10-18.02
As we can see Ford has already dropped significantly from its 52 week high of 18.02. The fact that it rests nearer its low is a good sign for the typical value investor. A few strokes of good news could easily send Ford back towards its high, but let us first look at the overall health of the company. Beginning with its:
P/E Ratio: 8.36
As of February 10th the P/E ratio for the S&P 500 was 19.07. This makes Ford's 8.36 look quite attractive at first glance. A look at earnings growth more or less supports this. At the moment Ford is experiencing quarterly revenue growth of 3.20%, putting its growth rate at about 10% a year. In this context the P/E is slightly less impressive. 2013 was a great year for automakers, and it is possible that investor's are aware of the fact that 2014 may not be as great given the current environment. If that is the case, and Ford's revenue growth continues to decline, the stock price should too decline as investor's flee the stock for safer waters.
