Ford Motor Company (F 0.78%) is a boring business that's over 120 years old. But it's receiving a lot of chatter lately.
This automotive stock is having an exceptional May, as it's up 24% this month (as of May 22). That's better than the overall S&P 500 index. This gain might be piquing the interest of investors who want to ride the momentum to portfolio gains.
But first, take a step back to understand what's happening on both sides of the aisle with the company and stock. Here's the case for and against buying Ford right now.
Image source: The Motley Fool.
Valuation is a key part of Ford's bull case
Ford shares might be on a stellar run this month, but its valuation still looks cheap. The stock trades at a price-to-earnings ratio of 11.3. Compared to the trailing 10-year average, this represents a sizable 37% discount. In today's market environment, investors might struggle to pass up on this deal.
As a result, the dividend yield is hefty at 4.02%. Besides attracting value-focused market participants, Ford might draw the attention of investors searching for dividend stocks.
Ford's pro segment is another factor supporting the bull case. This division sells vehicles, software, and services to commercial and government customers. It posted an 11.4% operating margin in the first quarter (ended March 31), which is better than the company's overall operating margin.
"Paid software subscriptions grew to 879,000, a 30% year-over-year increase," chief financial officer Sherry House said on the Q1 2026 earnings call about Ford pro.
The stock's monster rise in May is likely due to the introduction of a new segment called Ford Energy. Leaning on its electric vehicle infrastructure, the company plans to sell battery energy storage systems starting in 2027. It wants to capitalize on demand for these solutions, which could introduce a growth engine.
The bear case calls the quality of the business into question
Ford's position as a mass market auto manufacturer defines its bear case. These companies typically register low growth and weak profits. Ford is no different.
Between 2015 and 2025, its automotive sales increased at a yearly clip of 2.2%. Given the industry's maturity, this isn't that surprising. For example, the number of vehicles sold in the U.S. in March was the same as the total about 20 years ago.
A large cost structure leads to poor profitability. Ford's quarterly operating margin averaged 1.6% over the trailing decade. There are no economies of scale, as the business hasn't been able to sustainably increase its margins.
Adjusted return on invested capital was 12.6% in the past 12 months. This isn't a promising figure since the weighted average cost of capital is probably high. So, there might be no economic moat present.
This is an extremely capital-intensive business model. Ford must constantly invest in research and development and manufacturing capabilities just to maintain its current competitive position.
And demand can be very cyclical. Buying a new car is a huge financial decision for the average household. You can bet that during tough economic times, consumers will delay purchasing a vehicle to conserve cash. This will hurt Ford's financial performance.
NYSE: F
Key Data Points
Should you buy Ford?
After considering both the bull and bear cases, the answer to whether this auto stock is a buy becomes clear. In my view, Ford is best avoided. This is especially true for long-term investors looking to build wealth.
As the bear case suggests, this is not a high-quality company. This is obvious, as the financial metrics discussed highlight.
And the stock's track record isn't encouraging. Over the past decade, which is arguably a long enough time frame to draw a conclusion, Ford shares produced a total return of 92%. Had you allocated $10,000 to the stock in late May of 2016, you'd have $19,160 today.
Investors who simply bought an S&P 500 exchange-traded fund, like the Vanguard S&P 500 ETF, would have seen a total return of 331%.
Looking to the next decade and beyond, I see no reason for this trend to change in Ford's favor.
