Ford Stock Is Trading Below $10: Should You Buy It Hand Over Fist Right Now and Hold for 20 Years?

While monster technology enterprises draw all the attention, it's worth pointing out that Ford Motor Company (NYSE: F) was once considered the bellwether of the American economy. It was founded in 1903, and its history highlights customer interest in the vehicles the business offers, namely its pickup trucks and SUVs.

This Detroit auto stock is currently trading below $10 per share. Does this mean investors should buy it hand over first and hold for 20 years?

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Cheap with lots of income

Valuation is one of the most obvious reasons to scoop up shares today. While traditional mass-market automakers don't typically trade at high multiples, some investors may view Ford's current setup as a fat pitch.

As of April 17, the stock sells for a price-to-earnings (P/E) ratio of 6.6. In comparison, the S&P 500 index trades at a P/E multiple of 21.4, more than three times as expensive as Ford. This reveals the market's overall weak sentiment toward the company. However, even reaching a P/E ratio of 10 introduces 52% upside for prospective investors.

The cheap valuation naturally leads to a high dividend yield of 6.23%, which is notable for some investors who favor companies that cut them a check every quarter.

Another reason to be bullish on the business is the success of Ford Pro. This is the segment that serves professional customers with certain vehicles, software, and maintenance. Management is aiming to drive more "recurring, high-margin, noncyclical revenue" with this division, according to CFO Sherry House. Ford Pro increased sales by 15% year over year in 2024 to $66.9 billion, while generating operating income of $9 billion.

Fundamental weaknesses too hard to ignore

Ford's valuation might be low for valid reasons. The stock's track record is wildly disappointing. Even including dividends, shares produced a total return of just 1% in the past decade and 97% in the past 20 years. Had you simply invested in an S&P 500 exchange-traded fund, your portfolio would've done substantially better.

It's easy to be pessimistic about the stock's future. It all comes down to some very adverse characteristics for Ford.

The global auto industry is extremely mature. As a result, there isn't much growth potential. Ford's revenue isn't going to rise meaningfully. In the U.S., the company's most important market, 18.2 million vehicles were sold in March on a seasonally adjusted annual basis. That number has barely budged from 10 or 20 years prior. That doesn't give investors much to be excited about.

Competition is another issue. From a consumer's perspective, there are so many choices when deciding where to spend money to buy a new vehicle. Both domestic players and international rivals are fighting for wallet share, focusing on the same purchasing decision points like pricing, quality, features, and brand. Given that Ford's return on invested capital is just 3%, the company clearly possesses no durable competitive advantages.

Ford's profitability is questionable

Profitability is troubling. Ford's operating margin has averaged a measly 2.4% in the past 10 years. Its expenses are just too high, with no sign of economies of scale. Add in the potential impact of tariffs, and Ford might be facing much higher costs, which would pressure its already weak margins.

Since cars are a huge purchase, Ford also deals with cyclicality. Why would households choose to buy a new car when they expect difficult times ahead? Ford's alarmingly low margins don't give it much wiggle room if revenue falls. Consequently, this puts the dividend at risk as well.

Ford has an operating history that spans well over 100 years. However, it has been a terrible investment. I see no reason for this to change. The stock should be avoided even though it's trading below $10.

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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.