What’s the better buy: GM or Ford?
- GM shares pulled back about 1.31% on Monday. The stock is now up more than 56% this year.
- Ford edged slightly lower 0.81% to trim the current year-to-date gains to about 86%.
- Both stocks have experienced massive gains this year. So, which is the better buy?
US automobile manufacturers General Motors Co. (NYSE:GM) and Ford Motors Co. (NYSE:F) are going through one of their best years as publicly traded stocks. GM pulled back about 1.31% on Thursday to bring the current year-to-date gains to 56%. On the other hand, Ford is up a whopping 86% this year after Monday’s slight decline of about 0.81%.
Both GM and Ford look set to continue gaining throughout the year, given the valuation and earnings expectations. So, which is the better buy now?
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GM shares are trading at an attractive price-earnings (P/E) ratio of 10.23. The company expects earnings to grow 22.59% next year and at an average of 12.84% for the next five years. Its forward P/E ratio of 9.44 suggests more upside potential going into the second half of the year. GM’s vision is to be only an electric vehicle manufacturer in the future.
Technically, GM shares appear to be trading within an ascending channel formation in the daily chart. GM also seems to be enjoying strong support from the 100-day moving average. The stock price has also moved closer to the overbought levels of the 14-day RSI.
Investors can target profits at around $69.38 or higher at $75.48, while key support levels are $55.72 and $49.30. GM delivered a bullish earnings surprise of 113.64% in the most recent quarter.
Like GM, Ford is looking to capitalize on the rapidly growing EVs market. Earlier last week, reports emerged that Ford’s EV sales for May nearly tripled compared to the same period a year ago. The company sold 10,300 electrified vehicles the previous month. Ford SUVs surged to the highest level in 18 years, the company reported. Ford shares trade at a P/E ratio of 16.09. Earnings to grow by 139% this year and by nearly 72% next year. According to estimates, Ford’s EPS will also grow at an average of 53% over the next five years.
Technically, Ford stock price appears to have recently made a bullish breakout from an ascending channel formation. The sharp price rise indicates an increase in bullish sentiment. The stock has now crossed to overbought levels of the 14-day RSI. A pullback could be imminent. However, Ford’s expected earnings for this year and over the next five years could keep the momentum going.
Investors can target profits at around $17.93 or higher at $19.92. Key support levels are $14.26 and $11.99.
Bottom line: Ford looks like the better buy
Although GM’s current P/E valuation is more attractive, there is nothing much to expect on earnings growth compared to Ford. It explains why investors are not willing to pay a high premium for GM shares. On the other hand, Ford looks more exciting in terms of bottom-line growth, and its P/E is not too high to put off investors.
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