The famous car manufacturer Ford Motor Company (F) in Dearborn, Mich., designs, manufactures, markets, and services a wide variety of cars, trucks, sports vehicles, and electric vehicles worldwide. It operates through Automotive; Mobility; and the Ford Credit segment. In comparison, Netherlands-based Stellantis NV (STLA) designs, engineer, manufacture, distribute and sell automobiles and light commercial vehicles, engines, transmission systems, metallurgical products and production systems worldwide. It offers its products under the brands Abarth, Alfa Romeo, Chrysler, DS, Dodge, Fiat, Jeep, Maserati, and others.
Auto manufacturing has been hit since the COVID-19 pandemic due to global semiconductor shortages and disruptions to raw material supply chains. However, as the supply crisis eases, auto manufacturing is expected to recover to pre-pandemic levels as demand soars. Governments around the world have focused on achieving clean carbon neutral status and encouraging the adoption of electric vehicles (EVs) through subsidies and friendly policies. This should allow car manufacturers to increase production.
F’s share price has gained 30.1% over the past year, while STLA has lost 17.5%. Also, F is the clear winner with a 23.3% gain over the past six months versus STLA’s 30.6% decline over that period.
Click here to see our Automotive Industry Report for 2022
But which stock is better to buy now? Let’s find out.
On January 26, 2022, F announced a new joint venture with Jiangling Motors Corporation in a 49:51 joint venture to accelerate the growth of F’s passenger vehicle business in China. This is part of the F China 2.0 business transformation plan. The operational efficiencies created by the joint venture should help both companies to improve their respective competencies to meet customer demands and needs.
On January 27, 2022, STLA announced its plan to increase its ownership from 50% to 75% in its joint venture with China Guangzhou Automobile Group Co., Ltd. (GAC). The increase in shareholding is critical to STLA’s plans to establish a new base for its business in China. The JV is now well suited to support the efficiency of the “One Jeep” strategy, which is focused on brand development in China.
Latest Financial Results
F’s revenue for its fiscal fourth quarter, ending December 31, 2021, increased 5% year-on-year to $37.70 billion. The company’s adjusted free cash flow increased 24.6% year-on-year to $2.33 billion. Also, adjusted EPS was at $0.26, representing a 23.5% year-over-year decline. In addition, adjusted EBIT increased 18.9% year over year to $2.04 billion.
STLA’s revenue for fiscal year 2021 increased 13.6% year-on-year to €152.11 billion ($165.29 billion). The company’s net profit from continuing operations increased 178.7% year-on-year to €13.35 billion ($14.50 billion). Also, its EPS came to €4.23, representing a 185.8% year-over-year increase. In addition, Pro Forma’s adjusted operating income increased 95.2% year-on-year to €18 billion ($19.56 billion).
Past and Expected Financial Performance
F’s revenue has been declining at a CAGR of 5.2% over the last three years. However, its EPS grew at a CAGR of 69.1% during the same period. Analysts expect F earnings to increase 15.9% this year and 9.8% next year. The company’s EPS is estimated to grow 30.2% in the current year and 11.6% next year. Furthermore, its EPS is expected to grow by 74.1% per annum over the next five years.
In comparison, STLA and EPS revenues have grown at a CAGR of 26.3% and 11.6%, respectively, over the last three years. Analysts expect STLA’s revenue to increase 5.5% in the current year and 7% next year. And the company’s EPS is expected to grow at a rate of 20.1% per annum over the next five years.
F’s 7.6% trailing-12-month leveraged FCF margin is lower than STLA’s 14.1%. Also, STLA is more profitable, with net income and EBITDA margins of 9.5% and 13.1%, respectively, compared to a negative value of F.
Dan ROE STLA, ROAand ROTC of 32.9%, 8%, and 15.5%, respectively, compared to a negative value of F.
In terms of forward non-GAAP P/E, F is currently trading at 7.74x, which is 158% higher than STLA, which is trading at 3x. Furthermore, the forward EV/EBITDA F ratio of 10.81x is 1.003% higher than the STLA of 0.98x.
F has an overall C rating, which means Neutral in our possession POWRA Rating system. In contrast, STLA has an overall A rating, which is equivalent to a Strong Buy. The POWR rating is calculated taking into account 118 different factors, with each factor being weighted to an optimal level.
F has a D value for Sentiment. Analysts expect the company’s EPS to fall at a rate of 0.7% annually over the next five years, which aligns with Sentiment’s ratings. In contrast, STLA has an A for Sentiment. The Street estimates the company’s EPS will rise at a CAGR of 20.1% over the next five years, confirming the level of Sentiment.
Furthermore, F has a C value for Quality, which aligns with a 12-month total return on investment that lags behind negative. In comparison, STLA has a B for Quality. This is justified because STLA’s 15.5% trailing-12-month total return on investment is 96.3% higher than the industry average of 7.9%.
Among the 69 stocks in Car & Vehicle Manufacturer industry, F is ranked #29. In comparison, STLA is ranked #3.
Beyond what I’ve stated above, we also rate stocks for Growth, Value, Momentum and Stability. Click here to see all F rank. Also, get all STLA rank here.
Demand for cars remains high as the economy recovers from the disruptions driven by the pandemic. And we think STLA is a better investment bet because of its relatively lower valuation and better profit margin.
Our research shows that the chances of success increase when someone invests in a stock with an Overall Buy or Buy Strong Rating. View all other top-rated stocks in the Car & Vehicle Manufacturers industry here.
Click here to see our Automotive Industry Report for 2022
F shares traded at $16.61 per share Tuesday afternoon, up $0.64 (+4.01%). This year, the F has fallen -19.62%, versus a -10.66% gain in the benchmark S&P 500 index over the same period.
About the Author: Dipanjan Banchur
Since he was in elementary school, Dipanjan has been interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. Again…
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