Why Ford Is Better for Investors Today
Dec 17th 2012 5:41PM
Updated Dec 17th 2012 5:46PM
Since Ford 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.
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' 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 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.
The article Why Ford Is Better for Investors Today originally appeared on Fool.com.Fool contributor Daniel Miller owns shares of Ford. You can follow Daniel on Twitter, @StreetSmartFool. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.