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Ford Motor Company (NYSE: F) is one of the shares of the S
Source: Jonathan Weiss / Shutterstock. com
Let’s see.
If you expect a change in Ford’s actions, you have the patience of a saint. The last decade has not been smart for U. S. automakers. But it’s been brutal for Ford.
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Ford’s inventory has dropped nearly two-thirds of its 2011 highs.
Source: GuruFocus. com Source: GuruFocus. com
And stay in brain that those declines happened one of the bullish markets in the history of American capitalism. During the same period, the price of the S
After a decade of inexorable falls, Ford’s stock seems cheap, at least on the surface.
Inventory is quoted at 0. 21 times sales. To put this in perspective, the S
I don’t just pick cherries. Under almost all other valuation measures that are not unusual, Ford’s stock would appear to be cheap. They do not have a price-to-earnings ratio that can be calculated due to the fact that the company has been trading at a loss lately, but it is trading at a reduced price. Adjusted price-to-earnings ratio for the cycle (“CAPE”) of 3. 9 and a price-price ratio of only 0. 97.
These are incredibly reasonable measures for a company of any duration or call recognition.
But while Ford is cheap, there is no apparent catalyst for Mr. Market to re-evaluate. The automotive industry needed to revel in a cyclic slowdown even before it hit the pandemic of the new coronavirus. Today, with unemployment still close to the highest generations and small businesses across the country absolutely destroyed through months of demands for social esttainment, the slowdown in car sales seems to be profound and unsustainable.
That would be bad news for any company. But it is potentially devastating for an over-indebted company in a mature and brutally competitive sector with too many marginal players.
As a quick and dirty indicator of Ford’s security, let’s take a look at his Altman Z-Score, a move developed in 1967 by New York University professor Edward Altman to assess the threat of bankruptcy. According to Altman’s calculations, the score is more than 80% accurate on whether a company will eventually go bankrupt.
The Z-Score is based on five monetary reasons:
working capital/total assets
individual/total assets
EBIT / total assets
capital market/total liabilities
total sales/assets
Ford is acting badly in all these measures because it is a company with superior asset value, with giant debts and a shortage of profitability. I’ll save you the calculation of how the score is calculated, but a score above 3 means the company is healthy, and a score below 1. 8 means you’re on your way to bankruptcy.
Well, in Altman Z-Score from Ford Action, the effects aren’t pleasant. At no time in the last 10 years has the score been above 1. 8. Today, the reading is only 0. 77 and has gone down all year round.
Source: GuruFocus. com Source: GuruFocus. com
Now, we put too much emphasis on a singles metric like this.
But the conclusions are clear.
Ford is not a healthy company. In fact, it is a very unhealthy company that was controlled to liw because the economy, until March, was healthy and interest rates were low.
Ford’s ultimate fate may depend on his ability to secure a government bailout, but it’s not a game he deserves to play with his savings. For now, it’s more productive to avoid inventory F.
At the time of publication, Charles Sizemore did not occupy (nor did he occupy) any position on the values mentioned in this article.
Charles Lewis Sizemore, CFA is the director of Sizemore Capital Management, an investment advisor registered in Dallas, Texas.
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