I'm a believer in growth stocks. As an analyst for our Motley Fool Rule Breakers service, I think you should be a believer too. But even I have to admit some growth stories are bogus, hence this regular series.

Next up: Ford Motor (NYSE: F). Is America's comeback automaker the real thing? Let's get to the numbers.

Foolish facts


Ford Motor Co.

CAPS stars (out of 5)


Total ratings


Percent bulls


Percent bears


Bullish pitches

1,612 out of 2,121

Highest rated peers

BYD Company, Volkswagen Preferred Shares, BMW

Data current as of Sept. 30.

Ford's turnaround story is about as impressive as turnaround stories come. The numbers tell a lot of the story. Most telling could be management's 4.5% return on deployed capital over the past 12 months.

If that doesn't seem like much, consider the context. Ford last earned 4% on its capital in 2000. It's taken a decade to get back where to the automaker is now. In the beleaguered car business, that's a record worth bragging about. Even so, some Fools wonder if Ford's turnaround is complete, and if it is, if the days of outsized stock returns are over.

"Given the general economic slowdown and recent fall in consumer sentiment, I think there is room for downside in Ford shares. Valuation is extremely poor, with a P/E ratio of around 7 versus a 5-year average of just 2.4. As Ford is not a growth stock, earnings growth will not be enough to lift the stock. The earnings outlook is looking poor, and estimates are declining. $10.00 is the target based on [a discounted cash flow analysis]," wrote Foolish investor Tradersinfo earlier this week.

The elements of growth


Last 12 Months



Normalized net income growth

Not material

Not material

Not material

Revenue growth




Gross margin




Receivables growth

Not available



Shares outstanding

3,439.3 million

3,368.3 million

2,396.3 million

Source: Capital IQ, a division of Standard & Poor's.

Aside from a ballooning share count, Ford is driving in the right direction. Let's review:

  • Revenue growth has returned. But that's actually understating it. Very few large car companies achieve double-digit revenue growth in a quarter, let alone over a full year.
  • Margins are also way up, a sign that the deep discounting that marked auto sales at the height of the Great Recession aren't plaguing Ford.
  • Receivables are more difficult to figure, but that's a minor concern. What matters is that cash is still flowing, though at a lower volume than in years past.

Competitor and peer checkup


Normalized Net Income Growth (3 yrs.)



BYD Company


Ford Motor

Not material

Honda Motor (NYSE: HMC)


Nissan Motor


Tesla Motors (Nasdaq: TSLA)

Not available

Toyota Motor (NYSE: TM)


Source: Capital IQ. Data current as of Sept. 30.

Here's where Ford falls down, and where Rule Breakers pick BYD stands tall. BYD is a Chinese automaker that's experienced outrageous growth over the past several years, enjoying progressively higher ROC along the way. BYD is also a cash machine, producing close to 5 billion renminbi in free cash flow over the past 12 months.

Grade: Unsustainable
Ford produces plenty of cash, as well, but the stock has rallied more than 70% over the past year. I'm inclined to think the comeback is already priced into the shares, and that BYD is the better play for growth grabbers. As such, I've rated BYD to outperform in my CAPS portfolio.

Now it's your turn to weigh in. Do you like Ford at these levels? Would you make it one of our 11 o'clock stocks? Let the debate begin in the comments box below, and when you're done, click here to get today's 11 o'clock portfolio pick.

You can also ask Tim to evaluate a favorite growth story by sending him an email, or replying to him on Twitter.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

BYD Company is a Motley Fool Rule Breakers recommendation. BMW and Ford are Motley Fool Stock Advisor selections. Procter & Gamble is a Motley Fool Income Investor pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy thinks Monty Python is sustainably funny.