As one of America’s oldest stocks, Ford Motor Company (NYSE:F) has been the subject to many of the same trials and tribulations as any cyclical stock. While the stock price has been heavily dependent upon macro economic factors and industry sentiment, it may be time to look beyond the noise and explore Ford’s fundamentals. Product sales, pent up demand and a seemingly insatiable Chinese marketplace make Ford an interesting opportunity for investors. Ford competes in U.S. and China, its two biggest markets, with other major automakers such as GM (NYSE:GM), Daimler AG (NYSE:DAI), Honda (NYSE:HMC), Toyota, Hyundai (SEO:005380) and Nissan (PINK:NSANY).
Ford’s Recovery & Recent Performance Are Impressive
Though the company returned to profitability in 2009 after several woeful years, investors seem less than impressed. Other than a relatively short-term run up at the end of 2010, Ford remained an out-of-favor cyclical stock during the economic downturn.
The economic uncertainty is what makes the company’s recent performance that much more impressive. Ford’s results are bolstered by their emphasis on international car and truck sales, making up nearly 37% of the company’s stock price by our analysis. China in particular has been a bright spot for Ford and is its second largest market.
Also worth noting is the aging of the U.S. auto market. Currently, the average age of an American driver’s automobile is 10 years; the highest in over 15 years. If September’s 10% increase in Ford unit sales is any indication the low interest rate environment, a strong international presence and a bump in domestic sales due to pent up demand may propel Ford upward. And Ford’s competition, including General Motors and Daimler AG may also benefit.
Finally, vehicle leases and loans account for 27% of the stock price. With historically low rates, added to the other factors alluded to above, this key division may also warrant adjustments moving forward.
With the roll out of new and revamped products imminent and a confluence of favorable conditions, Ford merits consideration on several fronts.
We have a price estimate of $14.15, which is 20% above the market price.
Understand How a Company’s Products Impact its Stock Price at Trefis
