For investors in the U.S., Ford Motor Company (F +1.13%) is probably a household name, especially these days. That's because its shares have performed extraordinarily well, producing a total return of 48% in 2025 (as of Dec. 17). That gain almost triples the performance of the S&P 500.
The Detroit carmaker has had a phenomenal year, giving it due credit. Investors should have no complaints. However, there's one automotive stock you should not hesitate to consider buying before Ford in 2026.
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Positive developments at Ford don't cover up what's under the hood
This year, Ford has been hit by tariffs, warranty costs, and a supplier factory fire. But investors have become more bullish. The stock started 2025 trading at a price-to-earnings (P/E) ratio of 6.8. Today, that multiple has climbed to 11.5.
The market is likely focusing on the success of Ford Pro. This segment sells vehicles, software, and services to commercial clients. It posted double-digit revenue growth and an 11.4% operating margin in Q3 (ended Sept. 30). It supports Ford's ability to generate predictable and recurring high-margin sales.
Management has also refocused its strategy with respect to electric vehicles (EVs). Efforts are being scaled back, with an emphasis on hybrids and smaller, more affordable EV models.
It's still easy to argue that Ford is a subpar business, though. Its long-term growth prospects are weak, profits are low, capital expenditures are significant, and demand is cyclical.
NYSE: RACE
Key Data Points
This luxury carmaker is a much better business
A much better business that investors should look at is Ferrari (RACE +1.51%). The one knock investors may have is that the valuation is never really cheap. Ferrari's stock price is down 29% from its peak, pressured by a softer-than-expected long-term outlook provided by executives in October, but it still trades at a rich P/E ratio of 37.
That valuation can be justified. Ferrari is an outstanding company that is nothing like its peers. It has an incredibly powerful brand that commands pricing power, supported by intentionally limited volume prediction. Ferrari caters to the ultra-wealthy, a group that is recession-resilient, leading to durable demand.
Its revenue has increased at an annualized rate of 12% in the past three years. And the business boasts an unbelievable trailing-12-month average operating margin of 29%. These factors are impossible to ignore.
In the past decade, Ford shares generated a total return of 65%, not even in the same ballpark as Ferrari stock's impressive gain of 726%. Looking to 2026 and beyond, the Italian car brand is without a doubt the better investment opportunity, as business quality matters. It's poised to significantly outperform again going forward.
