For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Ford Motor Company (NYSE:F) useful as an attempt to give more color around how Ford Motor is currently performing. View our latest analysis for Ford Motor
How F fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to examine different companies on a similar basis, using new information. For Ford Motor, its most recent trailing-twelve-month earnings is US$7.60B, which, relative to the prior year’s level, has jumped by a non-trivial 65.41%. Given that these figures are relatively nearsighted, I have estimated an annualized five-year value for F’s earnings, which stands at US$7.65B This means that, while earnings growth from last year was positive, over the past couple of years, Ford Motor’s earnings have been deteriorating on average.
Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the whole industry is facing the same headwind. Revenue growth over the last few years, has been positive, yet earnings growth has been declining. This implies that Ford Motor has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US auto industry has been growing its average earnings by double-digit 31.42% in the prior year, and 11.96% over the last five years. This shows that any tailwind the industry is deriving benefit from, Ford Motor is capable of amplifying this to its advantage.
What does this mean?
Though Ford Motor’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn’t always indicative of a continued optimistic outlook. There may be factors that are influencing the entire industry hence the high industry growth rate over the same period of time. I suggest you continue to research Ford Motor to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for F’s future growth? Take a look at our free research report of analyst consensus for F’s outlook.
- 2. Financial Health: Is F’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
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.