Despite trade worries and general economic uncertainty that continues to be on investors' minds, Ford Motor Company (F +3.38%) has had a terrific year. Shares have climbed 25% in 2025 (as of Nov. 20). And in the company's latest quarter, automotive revenue soared 10% year over year to $47.2 billion, with adjusted earnings per share totaling $0.45. These headline figures came in ahead of analyst estimates.
Most investors are probably familiar with this Detroit automaker. But could buying this automotive stock today set you up for life? Here's what you should know about Ford's investment implications.
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Consider Ford's bull case
Based on the most recent quarterly update, investors might think that it's easy to be bullish. Ford continues to sell the country's most popular pickup truck with the F-Series lineup. The business is a leader in trucks and SUVs, which are more profitable than sedans.
The company's pro segment remains a bright spot. It offers vehicles, services, and software to commercial clients. And the leadership team has focused on its success from a strategic standpoint, as it brings in a recurring and predictable source of sales.
During Q3, the pro segment posted 11% year-over-year revenue growth. And its operating margin was a notable 11.4%, much better than the business overall. Ford pro had 818,000 paid software subscriptions as of Sept. 30.
Investors might be drawn to Ford's cheap valuation. Shares trade at a forward price-to-earnings ratio of 9.1, which is a massive discount to the overall S&P 500 index. It seems the market still has low expectations, which can add upside should the company report robust financial results in the quarters and years ahead.
The dividend yield of 4.83% can also be compelling for investors seeking a passive source of income from their portfolio holdings.
It's time to be critical of Ford as a worthy long-term stock pick
It's perhaps even easier to be bearish on the business. Ford might have reported stellar financial results last quarter. However, its growth potential isn't anything to write home about. Automotive revenue increased by just 27% between 2014 and 2024. The industry is very mature, as vehicle unit volume doesn't show pronounced gains. This backdrop doesn't help Ford.
Profits are alarmingly low. In the past decade, Ford's operating margin has averaged a measly 1.8%. This can be a clear indicator of a depressed return on invested capital, which is the direct result of huge capital expenditure requirements, no economic moat, and intense competition in the auto industry.
To its credit, management has cost-cutting measures in place, with a plan to reduce expenses by $1 billion in 2025. But there's a limit to how much a business can lower costs before negatively impacting its operations.
Investors might have reservations about owning a company that faces such cyclical demand as well. Ford will undoubtedly be negatively impacted in a recessionary scenario, which could result in net losses and a dividend pause.
NYSE: F
Key Data Points
Can Ford be a monster winner?
Investors will clearly find it easy to believe that Ford isn't worthy of being a long-term stock pick in one's portfolio, particularly from a qualitative perspective, as mentioned. And the track record speaks for itself. The stock has generated a total return of just 53% in the past decade, which comes up significantly short of the broader S&P 500. In my view, this disappointing trend is set to continue over the next decade and beyond.
Therefore, it's no surprise that Ford shares aren't in a position to set investors up for life. For a company to fall into this rare club, it implies that there is the potential to earn a 50-fold or 100-fold gain over the very long term. Ford could not be further from this.
