Ford Motor Company is the second-largest domestic automobile manufacturer. Ford’s vehicle brands include Ford and Lincoln. The company’s sales represented 13% of U.S. car and truck market in 2020. Ford also engages in vehicle leasing and rental, and the manufacturing of electronic equipment. This week, I fundamentally analyze Ford’s stock. I review Ford’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account the past 3 years’ average free cash flow of $19,929 million figure, a 5% growth rate of FCF (growth for the next 10 years), 10% discount rate, 2% long term growth rate (growth from 10 year mark to perpetuity), 3,986 million shares outstanding, and $110,341 million of long term debt, the DCF analysis yields us an intrinsic value of $18.57 per share. Using the current stock price of about $15.19 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 33.8% if we hold this security through 2040.
Timestamp
0:00 Introduction
0:39 Business Overview
4:04 Key Ratios Analysis
14:57 Discounted Cash Flow Analysis / Intrinsic Value
17:01 Expected Rate of Return Calculation
18:12 Summary / Conclusion
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References:
Ford’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
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