Ford Motor Company (F): One More Good Reason to Buy

But the Focus was just the first in a wave of new Fords set to arrive in China by 2015, many of which will be built in shiny new factories financed by that $5 billion investment. Ford expects that wave to put the company on track to double its market share in China, to 6%, in three years. By 2020, Ford could be selling more vehicles in China than it does here in the U.S., executives have said.

How will that affect the price of Ford stock?

How Asia could add to Ford’s bottom line
Here’s a back of the envelope calculation to give us some idea of how China could affect Ford’s profits, and in turn the price of Ford stock: In 2012, VW made 3.7 billion euros (about $4.9 billion) from its Chinese joint ventures while delivering 2.8 million vehicles.

Ford will be able to build a little over 1.5 million vehicles a year in China by 2015. Ford’s profit margins will probably lag VW’s somewhat, but given Ford’s margins here in the U.S. it’s unlikely that they’ll be too far behind. So if VW made almost $5 billion on sales of not quite 3 million… we can estimate that Ford could make something in the neighborhood of $2 billion on sales of 1.5 million in 2015.

Obviously, there are a lot of variables that we haven’t taken into consideration. The final number could vary wildly from our quick estimate. But a $2 billion addition to Ford’s pre-tax earnings would represent a 25% jump over Ford’s 2012 profit.

Think that would be a nice driver for the stock price?

Now if Ford does nothing else but end its losses in Europe (which will probably total $2 billion this year) and hold its ground everywhere else, we could be looking at a nearly 50% increase in Ford’s pre-tax profits by the end of 2015.

What will that do for the price of Ford stock?

I can’t say for sure. But it won’t be bad, I’ll tell you that.

The article 1 More Good Reason to Buy Ford Stock originally appeared on Fool.com.

Motley Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.

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