Ford Stock Looks Cheap at 0.26X P/S - But is It Worth Buying?

Ford (F) trades at a low 0.26x forward P/S, appearing undervalued despite a 7% YTD stock gain. While its Ford Pro commercial division shows strong demand and growing software revenue, supported by a healthy balance sheet and a 5%+ dividend yield, significant headwinds persist. The EV segment continues to incur substantial losses, the traditional ICE business is slowing, and tariffs are projected to negatively impact 2025 adjusted EBIT by $1.5 billion. Consequently, 2025 sales and earnings estimates are down 7% and 40% respectively, creating an uncertain near-term outlook that suggests a cautious approach for new investors.

Analysis

Ford is presenting a classic value-trap dilemma for investors, trading at an attractive 0.26x forward price-to-sales ratio, which is below its historical average and key peers like General Motors. Despite the stock gaining 7% year-to-date against a declining industry, significant underlying issues temper the bullish case. The primary growth engine is the Ford Pro commercial division, which benefits from a strong order book, the successful launch of the new Super Duty, and a growing high-margin software business with 675,000 paid subscriptions. This strength is complemented by a robust balance sheet with $45 billion in liquidity and a compelling shareholder return policy, including a dividend yield over 5% and a commitment to return 40-50% of free cash flow. However, these positives are heavily counterweighted by severe headwinds. The Model-e EV division's losses are projected to widen to $5.07 billion in 2024 from $4.7 billion in 2023, while the traditional Ford Blue ICE business is slowing. Furthermore, the company anticipates a $1.5 billion negative impact on 2025 adjusted EBIT from tariffs, leading analysts to forecast a 7% decline in sales and a 40% drop in earnings for 2025.

Key Decisions for Investors

• Income-focused investors may find the 5%+ dividend yield attractive, supported by a strong balance sheet, but should remain aware of the significant forecasted drop in 2025 earnings.
• Given the substantial headwinds from widening EV losses, a slowing ICE business, and a $1.5 billion projected tariff impact, new investors should consider a wait-and-see approach until there is clear evidence of a turnaround or positive revisions to earnings estimates.
• Closely monitor the performance of the Ford Pro division and its high-margin software revenue growth, as this segment's outperformance is the primary catalyst that could offset weakness in other parts of the business.