Consumer Industry Trends And Its Impact On Forward Industries Inc (FORD)
Forward Industries Inc (NASDAQ:FORD), a USD$10.66M small-cap, is a consumer discretionary company operating in an industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a strong double-digit growth of 14.75% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether FORD is lagging or leading in the industry. See our latest analysis for FORD
What’s the catalyst for FORD’s sector growth?
E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. In the previous year, the industry endured negative growth of -6.10%, underperforming the US market growth of 4.49%. FORD lags the pack with its negative growth rate of -18.76% over the past year, which indicates the company will be growing at a slower pace than its luxury goods peers. As the company trails the rest of the industry in terms of growth, FORD may also be a cheaper stock relative to its peers.
Is FORD and the sector relatively cheap?
Luxury goods companies are typically trading at a PE of 20x, relatively similar to the rest of the US stock market PE of 22x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 12.56% compared to the market’s 9.99%, potentially illustrative of past tailwinds. On the stock-level, FORD is trading at a PE ratio of 17x, which is relatively in-line with the average luxury goods stock. In terms of returns, FORD generated 7.25% in the past year, which is 5% below the luxury goods sector.
What this means for you:
Are you a shareholder? FORD has been a luxury goods industry laggard in the past year. If your initial investment thesis is around the growth prospects of FORD, there are other luxury goods companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how FORD fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If FORD has been on your watchlist for a while, now may be the best time to enter into the stock. It delivered lower earnings growth compared to its luxury goods peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the consumer sector.
For a deeper dive into Forward Industries’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer discretionary stocks instead? Use our free playform to see my list of over 100 other consumer discretionary companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
