This American Classic Still Leads the Pack
Josef Ray is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The holiday bonus received by thousands of workers at the oldest American car company is a good omen for its investors. About 40,000 hourly workers at Ford (NYSE: F) are expecting profit shares of over $8,000 per person, which operate on the idea that employees get a bonus of one dollar for every million in the company’s North American operating profits.
Even gun shy investors and newbies would do well to get in the action and trade in this company’s stock. Shares of Ford are now at a cool $12.62 – up $0.23, or almost 1.8% – with the stock price steadily rising throughout the Dec. 24 trading day. For the year, shares advanced approximately 12.30%, and gained 14.15% the past three months. For the previous week, the stock gained 6.85% and, in the whole month of December, rose 8.61%. Substantial equity return also evinces the strength of the company, and subsequently, its stock.
Although some investors and analysts may find this company’s stock unreliable for the meantime – maybe due to aspects such as sluggish net income growth, low cash flow for company operations, and a potentially greater risk for debt management – shares have been trading at higher levels, especially when compared to a year ago.
The car industry holds Ford in high esteem, as it leads car sales in 2012 – in addition to the aforementioned accomplishments - lording it over rivals Toyota Motor (NYSE: TM) and Volkswagen, which are expected to take second place and third place in unit sales. Shares of Toyota have been down by almost .50% to about $90.75 per, while the range for stock trading in TMC is from $90.40 to $90.80 in recent trading sessions. The last year has seen Toyota’s shares trading from anywhere between a low of $64.05 and a high of $92.69, and has, overall, been lower in terms of current volume at 85,595 shares as opposed to average daily trades of 340,137.
From the perspective of stock valuation, Ford also offers a lot of bang for the (big) bucks when compared to other high-end car manufacturers, as it trades at a 3X P/E, and rival General Motors (NYSE: GM) has earnings that may be about thrice that of the former. High margins and potentially larger dividends are to be expected, compared to those who invest in many other major automakers’ stocks. GM, Ford’s biggest competitor, has the weakest industry profitability, with an operating margin of 5%.
Ford's stock has been boosted by initiatives of a potential $135-million investment in the Asian region over the next few years. Also, the improvement of the company’s bottom line will stem from future manufacturing in India, with a possible 80% of international growth generated by India and China in the coming decade. The Ford Focus and the flagship hybrid C-Max are but a couple of reasons behind the American car company’s impressive showing in the market, with the latter model outdoing Toyota’s much-ballyhooed Camry hybrid. The C-max sold 8,030 units in the first two months of release, while the Camry only sold 7,300 two months after coming out.
While revenue may have only been up a relatively paltry 3% for Ford’s 2012 fiscal year – mainly due to slow growth in America – this company has been stable and strong, expecting to return significant profitability to its European market in a few years with 8% operating margins for the long run. In addition, the transition of the said company to smaller cars from trucks will permit improved market penetration via casual buyers, with a third of the demand for more compact vehicles dependent on Ford’s forays into the Asian market.
JosefRayDagatan has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!