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Ford Motor Co. Message Board

  • jsteveco730 jsteveco730 Apr 27, 2012 11:46 AM Flag

    something fishy with SEC and F

    F is at a P/E of under 3. Does anyone else see this as a rigged game? You gotta love our financial system. No wonder we are falling behind. You can buy stock in a burrito company with an over infalted P/E but for cars we can tolerate a P/E under 3? LOL the SEC and market makers are making money on us again.

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    • Do you read the financials on these companies at all? You seem to ignore the financials on Jammin'; I guess you're doing the same thing with Ford. Look at the Balace Sheet.

      A company with a market cap of $38 Billion that has total debt of $100 Billion - almost 3 times what the company is worth! Gross profit of $20B on $100B of sales; it would require 5 years of gross profit to clear their debt (assuming everything else remains the same, which it won't).

      Look at GM - a $33 B company with under $15 B in debt. Gross profit of $19 B.

      • 1 Reply to brophtron
      • Actually I think you both are wrong. Because of the one time tax gain it is important not to put much weight into Ford's current P/E ratio and, instead, look at their forward P/E which is still very low. Long term debt as a per cent of capital is actually quite reasonable. Ford's debt is high but very manageable even if sales stay at these low recession levels. Ford's cash flow and margins are better than most of their competitors. GM might look better today on paper but Ford is building a much better foundation for the future. I own shares of both companies but would sell GM well before Ford; just look at the style and quality difference in their respective car models.

    • JS/Steve, JSteveCo730, There's a good answer from marketing psychology about "shortcuts" in thinking called "heuristics" They are not good to use with important choices, as they cause regret later. Bu they are EASY to use and EASY to teach, so popular.

      Heuristics explain how under-valued Ford gets skipped over, while over-valued Burrito Baby gets picked.

      The people choosing never learn about Ford's better P/E, because they eliminate Ford before they get that far in their due diligence. Burrito Baby makes it past the initial elimination stage, does not look AS over-valued as all the other over-valued stuff making it that far, so gets picked, driving its price up further.

      Extreme Example: The elimination is three things, so rigid and leaves little to pick from at the end.

      ELIMINATION STAGE: "Leave out anything in Europe, anything with debt, and anything with less than a 30% growth rate in the middle of the recession."
      EVALUATION STAGE: "Out of what's left, pick the one with the lowest forward P/E."

      That cuts out Ford and, frankly, any other stock that's not over-valued. It maybe eliminates 990 stocks out of 1000 in the first-cut, and leaves 10, one of which is Buritto Baby. Buritto Baby's P/E is "just 50". The person choosing doesn't understand it's over-valued because it is "so much better" than the 9 others, which have P/E's of 100 or higher.

      If it's a rigging, it's in the sense that people are
      (A) TAUGHT to start with an elimination stage (to use stock screeners). That's instead of, say, adding up points for everything that matters to get a score, and then picking a stock from near the top of the scored list.
      (B) TAUGHT, by example and repetition, to fill the elimination stage with things that will BIAS the final decision toward what the teacher wants to see chosen.

      There's more to it than that, variations that will let Ford be chosen, but I'm too tired tonight to write more.

      JB, Shaggy's mom

      • 1 Reply to mitchhound
      • Yes, exactly right.

        NOTE: That accounting change nicely turned Ford's negative retained earning into positive.

        Negative retained earnings is an easy "automatic eliminator" that people might use to screen out stocks so they have fewer to consider in depth before picking some for their portfolio. Now, when funds rebalance their portfolios each quarter or annually, that number will no longer be there stop them from considering Ford.

        JB, Shaggy's mom

    • Don't believe everything Yahoo finance lists on the summary page.
      Ford's ttm PE is not 2.37
      Ford's ttm EPS is not $4.94

      • 1 Reply to dreadpirateterry2006
      • People need to go Yahoo's Key Statistics page for F to see both P/Es. The "wrong" P/E for Ford, under 3, is "trailing", so based on past earnings, which show a one-time big boost to profit in Q4 that won't repeat.

        Even the right P/E is also too low, which is steve's point. It's "forward", so for the future (calculated from 2013 earnings estimates from the analysts). 2013 leaves out one-time things like Q4 and moves past the tsunami stuff now distorting 2011 and 2012 earnings comparisons across carmakers.

        Again, that PE is too low at under 8. That's seen once you realize Honda's forward P/E is 10.

        Honda resembles Ford in having business in Europe, and experienced some downside in Asia due to Thai flooding, just like Ford did.

        Honda is different, however, in one big way, was hit hard by the tsunami in its 2011 sales, over a period stretching from April 2011 to maybe Sept 2011. HMC will thus have a good percentage increase YOY for April 2012 through Sept 2012, due purely to "bouncing back" from the 2011 tsunami.

        We saw/see this in other Japanese carmakers, too, and also in Chrysler. Chrysler relies more on Japanese suppliers than do Ford and GM (maybe because its parent Fiat does so?).

        In fact, Chrysler closed US plants early for summer vacation in 2011, trying to let its Japanese suppliers "catch up".

        That's why its doubly important to jump ahead to 2013 earnings estimates, to stop Ford's one-time profit increase and other carmakers' tsunami bouncebacks from distorting earnings estimates and thus P/Es.

        JB, Shaggy's mom

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