Is Ford Stock a Buy Now?
Key Points
Ford announced another significant recall, adding to the record number of safety issues it had last year.
The company’s profit trajectory doesn’t exhibit economies of scale, which can be blamed on the challenging industry backdrop.
The stock’s cheap valuation is warranted.
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Ford Motor Company (NYSE: F) had a magnificent year in 2025 that saw its share price soar 33%. That gain came in well ahead of the S&P 500, which was probably a surprise development for investors. Nonetheless, the business continues to navigate the current economic landscape while dealing with ongoing safety issues.
Does the Detroit automotive stock present a worthwhile buying opportunity now?
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Ford operates in a financially challenging industry
Ford just announced another round of recalls. Over 1.7 million SUVs were recalled due to issues with backup cameras. And almost 605,000 SUVs were recalled because of a potential risk of failure for the windshield wiper motor. This extends a troubling streak for the business, which set a record in 2025 for the most recalls in a single year, with more than 150 issued.
Besides hurting Ford's reputation, these recalls can also have a negative effect on the company's financial performance. This clearly isn't an encouraging development, given that Ford's financial position isn't exactly wowing the crowd.
In the past decade, the company's operating margin has averaged just 1.9%. Even though this is one of the largest car manufacturers in the world, having sold 1.8 million units on an annualized basis in February, Ford has demonstrated zero operating leverage over the years. In other words, as its revenue has increased, profits haven't been able to grow at a faster rate.
This is the nature of the industry. A massive cost structure and huge capital expenditures are par for the course just for Ford to remain competitive. There's no reason for investors to believe that the business can post strong earnings growth on a consistent basis in the future.
Making matters worse is how difficult it can be to predict demand trends. For instance, Ford completely miscalculated the success of its Model e electric vehicle (EV) division. It took a significant $19.5 billion charge in Q4 (ended Dec. 31, 2025) to realign its strategy away from EVs and toward a bigger focus on hybrids. Demand for gas-powered vehicles also isn't the most stable, as macro forces can have a meaningful impact that can pressure Ford's financial results.
The dividend is high, but shares are cheap for a reason
I don't believe Ford is a high-quality business for reasons just discussed. And that's why this auto stock isn't worth investment consideration. That's especially true for those interested in owning some of the best companies for five years or more.
The stock trades at a cheap forward price-to-earnings ratio of 8.3, supporting the ultra-high dividend yield of 4.9%. However, this depressed valuation is justified. Investors who buy Ford shares will most likely see their position underperform the overall market in the long run.
Should you buy stock in Ford Motor Company right now?
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Neil Patel has 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.
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