Should you buy a Ford when it’s under $10?

At the time of this writing on the afternoon of December 30, 2024, Standard & Poor’s 500 It made a total return of 27% in 2024. It’s been another great year to be a stock market investor.

However, not all companies benefited from this rise. Ford (NYSE: F) It continues to pump the brakes for shareholders, resulting in a total return in 2024 that would have cost investors 12% of their initial capital expenditures.

You should buy this Detroit Car inventory While it’s trading at a hair under $10 per share?

Ford’s Pro segment, which includes its commercial operations that sell vehicles and services to other companies, has been a bright spot for the company. In the most recent three-month period, Q3 2024 (ending October 31), revenue rose 13% year over year, with the division setting a record Operating margin By 11.6%. This far exceeds Ford’s gross operating margin of 1.9%.

Another obvious bullish argument for investors is Ford’s dividend. The current yield, now at 6.04%, is compelling for income investors. The company’s history of consistent profitability helps it continue to return capital to shareholders in this way.

For an iconic automaker that has long been a pillar of the American economy and that consumers are undoubtedly familiar with, there’s no shortage of reasons for investors to avoid this stock at all costs.

The automotive industry has focused on transitioning to a sustainable future, and almost all manufacturers are investing in electric vehicles. Ford is no different, but the results have been disappointing so far. In the past nine months, the company posted an alarming $3.7 billion operating loss in its Model e EV segment.

Companies that own Economic moatOr lasting competitive advantages, which are high-quality entities that should be on investors’ radar. I don’t think Ford falls into this category. This is because the competition is too intense for Ford to stand out both domestically and internationally. There are much larger brands all competing for share of consumer wallet, with price, quality and features all key purchasing factors.

In the past five years, Ford Return on invested capital It averaged just 2.2%, well below the 10% average for the S&P 500. This is a clear indication of the lack of a moat, as the company is unable to earn returns that exceed its returns. Weighted average cost of capital.

Ford also lacks the ability to report strong financial metrics in key areas. To begin with, growth is weak, thanks in part to the maturity of the global passenger car industry. 2023 revenue of $176 billion was only 20% higher than 10 years ago.

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