Evaluating Ford (F) Stock's Actual Performance

Ford Motor Company (NYSE: F) is a well-known business in the auto industry, having been around since its founding in 1903. The company produces the extremely successful F-Series pickup trucks, which have been the best-selling vehicles in the U.S. for 48 straight years. And it's a symbol of American industrialism.

However, this doesn't necessarily mean the auto stock has worked out to be a worthwhile investment. Let's evaluate the performance of Ford shares from different time horizons.

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Look at Ford's long-term track record

In the past five years, Ford produced a total return of 85% (as of Dec. 9). Shares were hammered after the onset of the COVID-19 pandemic, so the recovery from a weak starting point helped drive the stock higher. Boosting Ford's returns is a hefty dividend yield of 4.56%. Management pays a quarterly dividend that currently amounts to $0.15. Income investors can appreciate that.

The S&P 500 (SNPINDEX: ^GSPC) still fared better. In the past five years, the broad index has generated a total return of 100%. The benchmark's outperformance during this time horizon isn't eye-popping. But by zooming out, the difference is notable. The S&P 500's trailing-10-year total return of 298% crushes Ford's 65%.

For what it's worth, Ford has more than doubled the index's total return in the past 12 months. The company has won over investors with solid financial results, particularly in Q3, when it beat Wall Street's revenue and earnings expectations.

Is Ford a high-quality company?

It's clear that Ford shares can have periods of market outperformance. However, investors shouldn't take this as a sign that this is a high-quality company. Investors should strive to own a wonderful business for the long term. There are key factors that indicate Ford doesn't fall into this category.

Ford's growth is weak, as automotive revenue climbed at a compound annual rate of just 2.4% between 2014 and 2024. That barely keeps up with economic expansion.

Profits are disappointing; the operating margin averaged 2.5% in the past five years. Ford is focused on cutting costs, but it can't avoid paying up for materials, labor, and manufacturing in order to remain relevant in an extremely competitive industry.

Then there's the fact that demand can be cyclical, with cars being a major purchase decision for households. In tough times, it's perhaps a better idea to delay buying a new vehicle. This can eat away at Ford's already low profitability.

Looking out over the next 10 years and beyond, I'm convinced that Ford will continue its trend of lagging the S&P 500. So investors should think twice before adding the stock to their portfolios.

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.