As an investor, I am intrigued by the fierce competition between two automotive titans: Ford and General Motors (GM).
Did you know that combined, these companies sold over 7 million vehicles in the United States alone last year? With such impressive numbers, it's clear that both Ford and GM have a significant impact on the industry.
But who will ultimately come out on top? In this analysis, I will delve into the risk and performance comparison, valuation metrics, fundamentals, revenue growth rates, and profitability of these giants. By examining these factors, I aim to determine which company offers the best potential for investors.
So, let's get ready to witness the epic battle between Ford and General Motors!
Key Takeaways
- Investing in the Automobile Manufacturers Industry carries high-risk factors.
- General Motors' performance is relatively better than Ford in the past 12 months.
- GM's valuation is slightly better than Ford's based on stock price, P/E ratio, and price/cash flow ratio.
- GM outperforms Ford in terms of fundamentals, including market capitalization, EBIT margin, ROE, revenue growth rate, and total debt to equity ratio.
Risk and Performance Comparison
In comparing the risk and performance between Ford and General Motors, General Motors has shown relatively better performance in the past 12 months. A comparative analysis of risk factors in the automobile industry reveals that both companies have experienced negative total returns, with General Motors performing slightly better than Ford.
The S&P 500 Total Return for the past 12 months was -4.78%, while General Motors' total return was -15.66% and Ford's total return was -24.54%. Additionally, General Motors has a higher stock price and a slightly lower P/E ratio and Price/Cash Flow ratio compared to Ford, indicating better valuation.
Furthermore, General Motors has stronger fundamentals, with a higher market capitalization, EBIT margin, ROE, and revenue growth rate compared to Ford. In terms of profitability and risk, General Motors has a higher EBIT margin and a lower beta and total debt to equity ratio, suggesting better profitability and lower volatility and financial risk.
Valuation Comparison
To determine the better valuation choice between Ford and General Motors, let's compare the companies' financial metrics and stock prices.
According to DCF Model analysis, GM's stock price of $39.22 has an upside potential of 29.30%, while Ford's stock price of $11.87 has an upside potential of 33.60%.
In terms of valuation ratios, GM has a slightly lower P/E ratio of 6.95 compared to Ford's 7.62. Additionally, GM's Price/Cash Flow ratio of 3.41 is more attractive than Ford's 7.02.
Taking these factors into consideration, GM appears to be slightly better in terms of valuation. However, it's important to conduct a comprehensive analysis of other fundamentals before making a final decision.
Fundamentals Comparison
Continuing the evaluation from the previous subtopic, let's compare the fundamentals of Ford and General Motors to determine which company comes out on top. In terms of financial metrics analysis, a comparative analysis of key ratios reveals some interesting insights. Here is a table comparing the key fundamentals of GM and Ford:
| Fundamentals | General Motors | Ford |
|---|---|---|
| Market Capitalization | $57.03B | $48.67B |
| EBIT Margin | 7.66% | 4.85% |
| ROE | 14.06% | -4.69% |
| Revenue Growth Rate | 4.53% | 0.46% |
From this analysis, it is evident that General Motors outperforms Ford in terms of market capitalization, EBIT margin, ROE, and revenue growth rate. These metrics indicate that General Motors has a stronger financial position and better profitability compared to Ford. Therefore, in this fundamentals comparison, General Motors comes out on top.
Revenue Growth Rates
Moving on to the revenue growth rates, let's delve into the contrasting performance between Ford and General Motors.
In terms of comparative analysis, it's evident that General Motors has shown significantly higher growth rates compared to Ford. General Motors has a year-over-year revenue growth rate of 23.41%, while Ford has a year-over-year revenue growth rate of 15.93%.
Looking at the 3-year compound annual growth rate (CAGR), General Motors maintains its lead with a growth rate of 4.53%, whereas Ford lags behind with a growth rate of 0.46%. These figures highlight the stronger performance of General Motors in terms of revenue growth.
This is an important aspect to consider in the battle between these automotive giants, as it indicates the ability of a company to capitalize on industry growth and generate higher sales.
Profitability and Risk Comparison
Now let's delve into the profitability and risk comparison between Ford and General Motors.
- EBIT margin comparison: General Motors has an EBIT margin of 7.66%, while Ford has an EBIT margin of 4.85%. This indicates that General Motors is more profitable than Ford.
- Debt burden analysis: General Motors has a total debt to equity ratio of 160.36%, which is lower than Ford's ratio of 325.42%. This suggests that General Motors has a lower financial risk associated with its debt burden compared to Ford.
- Lower risk investment: General Motors also has a lower beta of 1.46 compared to Ford's beta of 1.57. A lower beta indicates lower volatility and risk in the market, making General Motors a less risky investment.
- Overall assessment: Based on the EBIT margin and debt burden analysis, General Motors appears to be a more profitable and less risky investment option compared to Ford.
Conclusion
Based on the profitability and risk comparison between Ford and General Motors, it is evident that General Motors emerges as the more favorable investment option. When analyzing the two companies, GM demonstrates better performance across various metrics. GM's total return in the past 12 months is -15.66%, while Ford's is -24.54%. Valuation-wise, GM has a slightly lower P/E ratio and a more attractive Price/Cash Flow ratio compared to Ford. In terms of fundamentals, GM has a higher market capitalization, EBIT margin, ROE, and revenue growth rate compared to Ford. Furthermore, GM has a lower total debt to equity ratio and a lower beta, indicating lower financial risk and market volatility. Overall, these factors suggest that GM presents a more promising investment outlook.
| Metrics | General Motors | Ford |
|---|---|---|
| Total Return | -15.66% | -24.54% |
| P/E Ratio [FWD] | 6.95 | 7.62 |
| Price/Cash Flow | 3.41 | 7.02 |
| Market Capitalization | $57.03B | $48.67B |
| EBIT Margin | 7.66% | 4.85% |
| ROE | 14.06% | -4.69% |
| Revenue Growth Rate | 4.53% | 0.46% |
| Total Debt to Equity | 160.36% | 325.42% |
| Beta (24M) | 1.46 | 1.57 |
Table: Comparison analysis of General Motors and Ford.
Frequently Asked Questions
What Is the Historical Performance of the Automobile Manufacturers Industry Compared to the Overall Market?
Historically, the automobile manufacturers industry has shown a mixed performance compared to the overall market. Profitability comparison reveals that General Motors has consistently outperformed Ford in terms of EBIT margin and lower financial risk.
How Do the Stock Prices of General Motors and Ford Compare to Their Respective Upside Potential According to the DCF Model?
According to the DCF model analysis, General Motors has a stock price of $39.22 with an upside potential of 29.30%, while Ford has a stock price of $11.87 with an upside potential of 33.60%.
What Are the P/E Ratios and Price/Cash Flow Ratios of General Motors and Ford, and How Do They Differ?
The P/E ratio of General Motors is 6.95, slightly lower than Ford's 7.62. In terms of price/cash flow ratios, GM's ratio of 3.41 is more attractive than Ford's 7.02. There are slight differences between the two companies in these ratios.
How Do the Market Capitalizations of General Motors and Ford Compare?
In comparing market capitalizations, General Motors has a higher market capitalization than Ford. This indicates that General Motors is valued higher by investors in the automobile manufacturers industry compared to Ford.
What Are the Revenue Growth Rates of General Motors and Ford, Both Year-Over-Year and Over the Past 3 Years?
General Motors has a YoY revenue growth rate of 23.41% and a 3-year CAGR of 4.53%. Ford has a YoY revenue growth rate of 15.93% and a 3-year CAGR of 0.46%. GM shows significantly higher growth rates compared to Ford.