Why Ford Is Better for Investors Today

Since Ford (NYSE: F  ) hit a 52-week low in August, the stock has risen 23% and isn't slowing down. The good news for Ford investors' keeps rolling in, including recent sales and award announcements.

Recent headlines
Wednesday, its fuel-efficient 2.0L turbocharged EcoBoost engine, used in the Taurus and Focus ST, won WardsAuto's "10 Best Engines" award for exceptional performance. Although it's a coveted award, it's nothing new for Ford's EcoBoost engine, which has won the trophy every year since its inception. No competitor has won more "10 Best Engines" awards than Ford over the last five years, racking up an impressive tally of eight awards. The engine isn't just for looks, either. It's pulled more than its own weight in sales. After its 2009 inception, more than 520,000 EcoBoost-equipped vehicles have been sold globally. 

Recent sales figures
Ford keeps on truckin' in China as well, with its third consecutive month hitting a sales record in November. Ford has a lot of ground to make up if it wants to catch its rival General Motors' (NYSE: GM  ) pace of selling vehicles in China, although the Ford Focus was the best-selling passenger car in China from August through October. Overall, Ford sold 67,505 wholesale vehicles last month for an impressive 56% increase compared with November 2011. With the past three record-setting months, it's pushed Ford's year-to-date sales in China up 18%. Ford's concerted effort to be a bigger player in China is paying off and should continue to add to growing sales. 

Part of Ford's recent success in China is at the expense of Japanese automakers. A recent territorial dispute between Beijing and Tokyo is causing a fierce backlash against Japanese businesses. Honda (NYSE: HMC  ) posted lower October sales in China -- down 54% --  compared with October 2011, and 29% lower for November compared with the same time last year. Nissan shared the pain, also posting plunges of 41% and 29.8% for October and November, respectively, versus the prior year. 

All of this is well and good, but what else is driving the increase in Ford's stock price? It's strengthening balance sheet is giving investors a reason to jump in. Just taking a look at two factors -- its debt level and net margin -- will give investors reason for optimism.

Ford debt

Management's focus on lowering the company's debt level paid off in May 2012, when Ford was able to reclaim its Blue Oval logo that was put up as collateral for loans in 2006. It received an investment grade rating by Moody's, which was a complete turnaround from Moody's calling the  stock "junk" in 2005.

Ford net margin
 
The recession forced many dealers to dish out large incentives to create sales revenue. Since then, limited incentives combined with selling premium add-ons has helped margins recover; they more than doubled each year since 2009. 

Ford stock finally has positive momentum and isn't looking to slow down. I think the company has completed its turnaround, and the stock price is finally reacting. I still believe the stock is currently undervalued, even after its recent 23% boost. The bottom line is that Ford is making a valuable product, a more efficient product, and much improved vehicles overall. I see a company with a bright future worthy of investment. What do you see? Let me know in the comments below.

Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. Ford's stock is finally climbing  from its lows. Is it still an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.


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  • Report this Comment On December 18, 2012, at 10:58 AM, TMFSymington wrote:

    Nice article, Dan.

  • Report this Comment On December 18, 2012, at 12:17 PM, SkepikI wrote:

    This is an outstanding big picture article. Deserves to be read (as does the research report) by any fool like me (ha) following ford. The recent recalls, especially the 1.6L overheating are troubling, and the "detailed" explanations (software fix?) make no sense. My own research into this is less than satisfying to this engineer, but seems to be related to an event - loss of pressure leading to overheating- that has been with us for as long as cars have existed. Idiot drivers ignoring temp gauges and continuing to drive get just what you would expect- overheating. The only mystery is does the "software" somehow contribute to their ignorance about the overheating and induce them to keep driving? So far no good answer to that one from F, but ever curious, I will keep trying.

    Long F. Interested at less than $10/sh but not where it is today. Maybe short sighted since better days are ahead...

  • Report this Comment On December 18, 2012, at 1:18 PM, TMFTwoCoins wrote:

    Thank you both.

    I'm long F as well, as the disclosure states.

    @Skeptikl

    Obviously there is a lot to consider, but even with the recent rally F still seems fairly cheap. I never suggest to try and time the market for an entry, but at some point there will be a pull back in the market or in F and I'll strongly consider picking up some more shares then! Outstanding CEO and management, I hope they stay out of retirement.

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