Investors are always trying out new strategies to find a great stock. Value investing is one of the most popular strategies to find a stock worth investing in, irrespective of the investment environment. After all, everyone wants to find a stock that costs less than what its price should be, or offer attractive discounts when it is compared to fair value.
One way investors try to detect these stocks is by looking at many key metrics as well as financial ratios, with many of them playing a key role in the process of selecting a value stock. So is the Ford Motor Company (NYSE:F) stock a good pick for a value-oriented investor at this time, or should these investors look elsewhere?
Ford Motor Company, headquartered at Dearborn in Michigan, United States, is a leading automobile maker in the world.
The PE Ratio
Value investors are always looking at the PE or the Price to Earnings Ratio of a stock. Clearly one of the most popular financial ratios among investors from around the world, the PE ration tells us how much the investors are agreeing to pay for each dollar of earning of the stock. To best use this, compare the current PE ratio of the stock to its past ratio, see how it stacks up to the industry or sector average, and finally find out how the stock’s current PE ratio compares to the overall market.
Here, the Ford stock has a trailing 12 months PE ratio of 6.60. At this level, the Ford stock compares favorably with the overall market, because the S&P 500 PE ratio is about 20.18.
The Ford Stock Is Presently Undervalued
When comparing the stock’s long-term trend to the current levels, the current PE is close to its low. Ford’s PE is presently well below the 9.66 median. Further, the number has been generally going down since 2015. So it can be said that the stock is presently undervalued, particularly when it is compared to its historical trend. The current level of the Ford stock is thus a good entry point from the PE perspective.
The Ford Motor stock’s PE ratio compares well with the Zacks Classified Automotive – Domestic’s trailing twelve months PE ratio as well, which is 9.87. This also shows that the Ford (NYSE:F) stock is presently relatively undervalued when you compare the stock to its peers.