As Tesla Inc. shares trade above $300, out of reach for some investors, shares of competitors Ford Motor Co. and General Motors Co. have been at their most undervalued in years.
Ford and GM are both attractive stocks from a valuation point of view, and both are financially stable, pay a dividend, and “have loads of cash in their balance sheets,” said Bill Selesky, an analyst at Argus Research. But it may matter little as investors seem more concerned about lower U.S. auto sales going forward and auto credit deterioration, he said.
“Investors are staying away from autos,” he said.
shares seem immune to such concerns as the company gears up for launching the Model 3, the all-electric $35,000 sedan it hopes to sell by the end of the year.
Tesla’s future plans involve new passenger cars, solar roof tiles, efforts around driverless cars and car sharing, and even a freight truck, which Chief Executive Elon Musk promised to unveil in September.
Tesla shares broke a string of record closes earlier this month, which pushed the Silicon Valley car maker’s market value firmly above Ford’s and rivaling GM’s as the No. 1 U.S. car maker by value.
Ford’s price-to-earnings ratio is currently around nine times, while GM’s is around eight times. That contrasts with ratios around 21 times for GM and 19 times for Ford in 2014, according to FactSet.
P/E ratios for Tesla are meaningless because the company hasn’t posted a GAAP profit in the years since it went public in 2010.
Price-to-book ratios, which calculate share prices as a function of a company’s net asset value, also underscores how Ford and GM shares are currently undervalued.
Tesla’s P/B ratio is around 10 times, while Ford’s is 1.6 times and GM’s is 1.2 times. In comparison, the S&P 500 index’s
P/B is around 3.
Current weakness for Ford stock is a buying opportunity, analysts at Nomura said in a recent note. U.S. auto sales are plateauing at a high level, and the continued consumer preference for SUVs over sedans is beneficial for Ford, a leader in the light-truck segment, they said.
GM recently launched or is about to launch redesigned SUVs to its lineup, which is likely to help the company’s pricing and manage its incentive programs, the Nomura analysts said in a separate note. The analysts have buy ratings on both stocks.
Analysts at Goldman Sachs said this week they expect an earnings beat for GM, on cost savings, and a miss for Ford.
GM’s “elevated” inventory levels heading into the spring selling season may mean that the company will either have to increase incentives, negatively impacting price, or lower production to bring inventory back down to healthy levels, the Goldman analysts said.
For Ford, the key to first-quarter earnings will be its North America’s price performance, as Ford’s incentives in the region have trailed peers, the analysts said.
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Ford is scheduled to report first-quarter earnings next Thursday, an analysts polled by FactSet expect adjusted earnings of 36 cents on sales of $34 billion. GM, which is scheduled to report next Friday, is expected to report adjusted earnings of $1.46 on sales of $40.6 billion.
Tesla is set to report May 3, and the analysts surveyed by FactSet forecast an adjusted first-quarter loss of 76 cents a share on sales of $2.6 billion.