Ford Motor Company

Methodology

Ford's automotive business exhibits extreme earnings cyclicality tied to vehicle demand, pricing power, and production costs, making normalized earnings essential. The company can swing from billions in profits to losses within auto cycles. Fair value calculations require mid-cycle assumptions for volumes, pricing, and margins rather than peak or trough conditions amid EV transition costs.

Methodology

Ford trades at very low PEG ratios (often below 0.5x) during strong auto markets, reflecting market skepticism about earnings sustainability and concerns about EV profitability. Legacy pension obligations and capital intensity constrain returns through cycles. PEG misleads for automakers because cyclical earnings swings don't reflect sustainable business improvement.

Methodology

Ford pays a dividend yielding 4-6% when profitable, though dividend sustainability through downturns remains uncertain given capital needs for EV transition. The company suspended dividends during COVID and faces ongoing capital demands. Total return depends more on cyclical timing and operational execution than reliable income streams.