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How Ford’s Valuation Multiples Look ahead of Q1 2019 Event

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Dec. 4 2020, Updated 10:53 a.m. ET

Ford’s forward EV-to-EBITDA

As of April 22, Ford’s (F) forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple was 13.1x. This multiple was calculated based on analysts’ consensus estimates for the company’s EBITDA estimates for the next 12 months. In the last year, Ford’s EV-to-EBITDA has gone down, but it’s still much higher than many of its competitors including General Motors (GM) and Fiat Chrysler (FCAU). GM’s and FCAU’s forward EV-to-EBITDA multiples were 8.6x and 1.9x, respectively.

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Forward PE ratio

Ford’s forward PE multiple was 7.6x, also higher than GM’s 6.1x and FCAU’s 5.0x but lower than Toyota’s (TM) 7.6x. These forward valuation multiples were calculated based on future earnings estimates.

The valuation multiples of Ferrari (RACE) are typically higher than those of other mainstream auto industry players (XLY), as Ferrari sells only luxury cars, which tend to yield much higher profit margins than mass-market cars. As of April 22, Ferrari’s forward PE multiple was at 33.4x.

Key drivers

A legacy auto company like Ford that has a proven earnings track record is sensitive to factors that increase its risk profile. These risk factors could act as key drivers for its valuation multiples.

Wall Street analysts’ negative estimates for Ford’s first quarter and uncertainties about the company’s progress toward its 2019 guidance could already be factored into its valuation multiples. Only stronger-than-expected first-quarter results, especially a rebound in its profitability, should have a positive impact on Ford’s valuation multiples in the near term.

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