The changing nature of the auto industry makes it hard for Ford to properly allocate financial resources with a long-term focus.
This company is never going to be able to generate high profits.
Investors who are after robust returns will need to reconsider this opportunity.
With its impressive lineup of vehicles, led by its strong position in trucks and SUVs, Ford (NYSE: F) is a business that probably all market participants are familiar with. It's been around for a long time, and that might drive interest from some investors.
Where will this automotive stock be in 10 years? Here are three reasons the answer will be disappointing.
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Ford has been a leader in gas-powered cars for a long time. But in the past decade, the industry has shifted, as electric vehicles (EVs) have captured greater market share. Ford's F-150 Lightning and Mustang Mach-E are well-known models. But massive losses in the Model e division and slower demand trends in the overall EV industry have led to huge financial losses for the Blue Oval.
It has changed course, now fully focused on producing high-volume, lower-priced EVs. This highlights how difficult it is for Ford to properly allocate time and resources when outlining its strategic priorities with a focus on the long term.
There's no telling how things will shake out in the future. Market conditions, which are clearly unpredictable, might force the business to alter its playbook once again. That doesn't instill confidence in the shareholder base.
Another reason why Ford won't be the best performer over the next 10 years is that its fundamental track record is unmistakably troubling. For starters, the mass-market auto industry doesn't support sizable growth. Ford's 2025 car revenue was only 24% more than the total from 2015. It also doesn't help that demand is sensitive to economic forces, given that cars are huge purchases for consumers.
That cyclicality would be easier to stomach if Ford was raking in lots of profits. This isn't true, though. The company's operating margin averaged 1.9% between 2015 and 2025, showcasing no added benefit of more scale.
Over the last decade, Ford's stock has generated a total return of 48% (as of March 13). Investors that bought $10,000 worth of shares would've seen that position grow to $14,840 today. Had you simply purchased the S&P 500 index, you'd have $38,910 right now, translating to a much better 289% total return.
Between now and March 2036, is it likely that Ford can reverse course and beat the market? I wouldn't bet on it. This business just doesn't possess the traits that support strong long-term capital appreciation, as mentioned.
For those investors who are going after quarterly income, this unfavorable reality might not matter. Ford's dividend yield of 5.14% is attractive if that's all you care about.
Before you buy stock in Ford Motor Company, consider this:
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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.