Ford Stock: A Tale of Two Returns, Where Market Sentiment and Fundamentals Diverge

Ford Motor Company (NYSE: F) shareholders have endured a difficult three years, with the stock's value plummeting by 62%. The pain continued more recently, with a 12% slide in the past 90 days alone. After such a steep decline, many investors might be left scratching their heads and wondering about the company's future.

Here's a closer look at some of the key factors that have influenced Ford's stock performance.

Ford's fundamentals: A closer look

While the share price declined significantly, Ford's earnings per share (EPS) grew at an annual rate of 7.3% during the same three-year period. This disconnect between earnings growth and declining stock value could be due to external factors or potential overvaluation in the past influencing the current market perception.

Another important metric for long-term investors is revenue growth, and Ford showed an increase in its top line during these years. Additionally, the company continued to pay dividends, which could bolster its appeal to income-focused investors. Finally, insiders were also seen purchasing shares in the past year, which could indicate their confidence in the company's future.

TSR vs. share price return: Which matters more?

When assessing investment returns, it's crucial to differentiate between share price return and total shareholder return (TSR). TSR includes reinvested dividends and other shareholder benefits, providing a more comprehensive view of the total return. For Ford, the TSR over the past three years was -53%, which is slightly better than the share price decline but still not encouraging.

Putting it into perspective

Over the past year, while the broader market, as represented by the S&P 500 index, rose by about 23%, Ford shareholders faced a 9.9% loss, even after factoring in dividends. However, long-term investors with a five-year horizon have still seen annualized returns of 6%, indicating some resilience in the stock amidst market volatility.

As the company continues to grow its revenue and insiders display faith in its potential, the current downturn could present a buying opportunity for some investors. However, it's always advisable to carefully assess the company's fundamental performance and the broader market trends before making an investment decision.

Ford's story is a reminder that market sentiment and fundamentals don't always align, but understanding the reasons behind such divergences is key to making informed investment choices.