This Automaker Has More Upside Potential

Ford (NYSE: F  ) has been running at full speed lately, the stock is up by more than 33% in 2013 thanks to an improved product portfolio and solid financial performance. But make no mistake, it's not too late to ride this iconic American automaker for the long term.

Strength in pickups
Ford has always been an undisputed leader in light trucks: the F-Series has been America's best-selling vehicle for 36 consecutive years, and the company seems to be widening its leadership versus GM (NYSE: GM  ) lately.

Ford delivered an increase of 9.8 % in truck sales during September to 60,456 units. This is especially encouraging considering that rival GM has recently launched its new Chevy Silverado and GMC Sierra models.

GM, on the other hand, has reported an unexpected decline of 10.8% in Silverado sales during September. The disappointing performance seems to be at least partially related to inventory constraints, so the company will likely regain some strength once it leaves those problems behind.

Still, truck sales are big profit drivers for American automakers, and it's encouraging to see Ford consolidating its leadership position in the segment even when facing rising competitive pressure from GM's new models.

Improving cars
Ford has dramatically improved the quality of its cars over the last years, and the company has been gaining market share in light vehicles versus Japanese competitors Honda (NYSE: HMC  ) and Toyota (NYSE: TM  ) in the last months.

The Ford Fusion is a true game changer for the company, not only in terms of sales, but also when it comes to improving consumer's perception about the brand and the quality of the cars that Ford manufactures. The Fusion has won a considerable amount of awards: It has been named "Green Car of the Year," "Best Car for Families," and "Best Car for the Money" among other nice things.

The company sold 19,972 Fusion units in September, a whopping increase of 62.4% versus the same month in 2012. Toyota Camry and Honda Accord, on the other hand, saw declines of 7% and 13.7%, respectively, in the same period.

Escape sales dropped by 2.3% in September and Explorer delivered a moderate increase of 6.5% for the month. However, Fiesta sales were especially strong with an increase of 29% versus September 2012.

To its traditional leadership in light trucks Ford is adding improved quality and market share gains in smaller vehicles. As long as the company continues on the right track, this will provide diversification and extra sources of growth for the company and its shareholders over years to come.

By the numbers
Ford is firing an all cylinders; the stock has risen by more than 33% year to date and by an amazing 75% in the last 12 months. For this reason, investors may be wondering if this is a good time buy Ford or if the stock has already gone too far.

Fortunately, Ford is still looking quite inexpensive when compared to industry peers. The stock carries a P/E ratio of 11.5 versus 12.6 for GM and much higher valuations for Japanese competitors Honda and Toyota which trade at P/E ratios of 18.8 and 16.1, respectively.

The company reinstated its dividends in 2012 and doubled its payments to $0.10 per share this year. Ford is yielding 2.4% in dividends at current levels, and the payout ratio is comfortably low in the area of 19% of earnings, so investors in Ford have solid reasons to expect growing dividends from the company in the coming years.

A stock should not be considered cheap or expensive in comparison to past price levels. Valuation is about comparing price versus fundamental measures of value like earnings and dividends, and Ford is still looking quite attractive form that point of view.

Bottom line
Ford is an undisputed leader in light trucks, a profitable segment which is delivering strong growth for the company. In addition to that, the company has materially improved its competitive position in cars, and it's now gaining market share versus the competition in that segment.

Even after a strong rally, shares of Ford are still reasonably priced, especially considering the company's rock solid performance. So fasten your seat belt and keep your hands on the wheel, because the ride is hardly over for Ford.

Ford's Future
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