With the S&P 500 trading at an average price-to-earnings multiple (P/E) of 34, now is a good time to consider value stocks -- shares in companies trading at low multiples compared to their earnings and growth potential. Ford Motor (F -0.21%) fits into the category because of its low valuation and compelling pivot to electric vehicles. Let's dig deeper. 

The restructuring is showing results

In 2018, Ford announced a massive restructuring and cost-cutting program that saw it lay off thousands of workers and reshuffle its product mix to focus on higher-margin trucks and SUVs. The strategy is already making a significant impact on the company's operations. 

Generic car speeding.

Image source: Getty Images.

As of June 2021, Ford's U.S. car sales volume dropped to just 2.5% of its total vehicle sales compared to 20% at this time in 2018. The company is also exiting loss-making international markets -- ending manufacturing in India and Brazil, for example. Divesting unprofitable markets (Ford lost over $2 billion in India during the last 10 years) could help free up capital and resources for the company's electric vehicle transition. 

Meanwhile, Ford is leveraging its strong brands (namely, the Mustang and F-Series) to build an economic moat as its products gain recognition. Review platform CNet ranks its Mach-E as the best midsize electric car for 2021, beating out Tesla's Model 3. And the all-electric F-150 Lightning (expected to launch in 2022) already boasts over 120,000 customer reservations -- all the more impressive because three-quarters of that number would be new customers. The company also recently converted two-thirds of the 190,000 reservations for its new Bronco into actual orders.

Navigating near-term challenges

Ford's second-quarter revenue jumped 38% year over year to $26.8 billion, helped by an easy comparison to pandemic-affected results in 2020. But it's not all smooth sailing. The company faces headwinds from the semiconductor shortage, which sent U.S sales down an astounding 33% in August. Analysts at advisory firm Forrester think the shortage could last until 2023.

But Ford has used the crisis as an opportunity to modernize its distribution by focusing on build-to-order sales, which CEO Jim Farley claims is better for its consumers and dealers. Customers get the exact car they want (albeit with a delay) while dealerships have less inventory to manage. The chip shortage could also encourage Ford to prioritize the production of its most profitable vehicles, improving its sales mix. 

In July, management offered guidance for the year, saying that adjusted earnings before interest and taxes (EBIT) could total $9 billion to $10 billion -- up from $2.8 billion last year. But it is unclear how the uncertain semiconductor situation will impact that forecast.  

Betting on value 

With Ford's shares up sharply this year, more investors appear to be betting on its transition to a streamlined, EV-focused automaker. Yet with a forward P/E multiple of 9, the stock is still dirt cheap compared to EV rival Tesla, which trades for 143 times forward earnings. 

Ford is unlikely to match Tesla's stratospheric valuation anytime soon (or ever). But its popular automotive brands and aggressive restructuring plan make it an excellent alternative for value-oriented investors who want exposure to the EV opportunity without overpaying.