Stock Analysis on Net
Stock Analysis on Net

Ford Motor Co. (NYSE:F)

Present Value of Free Cash Flow to Equity (FCFE)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Ford Motor Co., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 19.20%
01 FCFE0 14,837
1 FCFE1 -10,853 = 14,837 × (1 + -173.15%) -9,105
2 FCFE2 3,537 = -10,853 × (1 + -132.59%) 2,489
3 FCFE3 282 = 3,537 × (1 + -92.03%) 167
4 FCFE4 137 = 282 × (1 + -51.46%) 68
5 FCFE5 122 = 137 × (1 + -10.90%) 51
5 Terminal value (TV5) 361 = 122 × (1 + -10.90%) ÷ (19.20% – -10.90%) 150
Intrinsic value of Ford Motor Co. common stock -6,181
 
Intrinsic value of Ford Motor Co. common stock (per share) $-1.56
Current share price $11.05

Based on: 10-K (reporting date: 2023-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.65%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Ford Motor Co. common stock βF 1.59
 
Required rate of return on Ford Motor Co. common stock3 rF 19.20%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rF = RF + βF [E(RM) – RF]
= 4.65% + 1.59 [13.79% – 4.65%]
= 19.20%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Ford Motor Co., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Dividend and dividend equivalents declared 5,072 2,034 411 596 2,408
Net income (loss) attributable to Ford Motor Company 4,347 (1,981) 17,937 (1,279) 47
Company revenues excluding Ford Credit 165,901 149,079 126,268 115,941 143,640
Total assets 273,310 255,884 257,035 267,261 258,537
Equity attributable to Ford Motor Company 42,773 43,242 48,519 30,690 33,185
Financial Ratios
Retention rate1 -0.17 — 0.98 — -50.23
Profit margin2 2.62% -1.33% 14.21% -1.10% 0.03%
Asset turnover3 0.61 0.58 0.49 0.43 0.56
Financial leverage4 6.39 5.92 5.30 8.71 7.79
Averages
Retention rate -16.47
Profit margin 2.89%
Asset turnover 0.53
Financial leverage 6.82
 
FCFE growth rate (g)5 -173.15%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net income (loss) attributable to Ford Motor Company – Dividend and dividend equivalents declared) ÷ Net income (loss) attributable to Ford Motor Company
= (4,347 – 5,072) ÷ 4,347
= -0.17

2 Profit margin = 100 × Net income (loss) attributable to Ford Motor Company ÷ Company revenues excluding Ford Credit
= 100 × 4,347 ÷ 165,901
= 2.62%

3 Asset turnover = Company revenues excluding Ford Credit ÷ Total assets
= 165,901 ÷ 273,310
= 0.61

4 Financial leverage = Total assets ÷ Equity attributable to Ford Motor Company
= 273,310 ÷ 42,773
= 6.39

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -16.47 × 2.89% × 0.53 × 6.82
= -173.15%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (43,916 × 19.20% – 14,837) ÷ (43,916 + 14,837)
= -10.90%

where:
Equity market value0 = current market value of Ford Motor Co. common stock (US$ in millions)
FCFE0 = the last year Ford Motor Co. free cash flow to equity (US$ in millions)
r = required rate of return on Ford Motor Co. common stock

FCFE growth rate (g) forecast

Ford Motor Co., H-model

Microsoft Excel
Year Value gt
1 g1 -173.15%
2 g2 -132.59%
3 g3 -92.03%
4 g4 -51.46%
5 and thereafter g5 -10.90%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -173.15% + (-10.90% – -173.15%) × (2 – 1) ÷ (5 – 1)
= -132.59%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -173.15% + (-10.90% – -173.15%) × (3 – 1) ÷ (5 – 1)
= -92.03%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -173.15% + (-10.90% – -173.15%) × (4 – 1) ÷ (5 – 1)
= -51.46%