Ford’s valuation multiples
As of January 16, 2018, Ford’s (F) forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple was 13.6x. In the last couple of quarters, Ford’s EV-to-EBITDA has risen, and now it’s much higher than many of its competitors. In the same period, General Motors’ (GM) and Fiat Chrysler’s (FCAU) forward EV-to-EBITDA multiples were 8.3x and 2.5x, respectively.
Forward PE multiples
Ford’s forward PE (price-to-earnings) multiple is 8.1x, which is higher than GM’s at 7.4x and much higher than FCAU’s at 6.7x.
These forward valuation multiples are calculated based on the future earnings estimates of these companies.
The valuation multiples of Ferrari (RACE) are typically much higher than those of other key auto industry players (IYK). That’s partly because Ferrari produces super luxury vehicles that yield much higher profit margins than mass-market vehicles.
What could already be factored in?
For a mature company like Ford, which has a proven earnings track record, factors that may affect its risk profile are likely to be the key drivers for its valuation multiples.
Analysts’ positive estimates and investors’ high expectations for Ford’s 4Q17 earnings could already be factored into its valuation multiples. That could be one of the key reasons why its forward multiples are trending much higher than those of its direct competitors. Weaker-than-expected earnings, especially lower profitability, could negatively affect its valuation multiples going forward.
In the next part, we’ll look at the key support and resistance levels for Ford stock before its 4Q17 earnings event.