Ford Motor Company (F): This Automaker Looks Set to Accelerate

Despite the advantage of a cheap yen, Japanese automakers are unlikely to outperform Ford in the growing American and Chinese markets, as the Chinese continue to display strong anti-Japan consumer sentiment and American consumers continue to show strong preference for American brands. Even with a significantly devalued yen, Toyota’s April 2013 sales in the US dropped by 1.1%, a sharp contrast to Ford’s 18% April surge.

Valuation

Though Ford’s stock price has increased 15% over the last six months, its shares are still available at an attractive price compared to its competitors. Ford is trading at a price to earnings ratio below 10, while both General Motors Company (NYSE:GM) and Toyota trade in a P/E range between 10 and 20. This price discount partially reflects Ford’s higher debt to capital ratio, a result of having avoided filing for chapter 11 bankruptcy in 2009, unlike its American competitors GM and Chrysler.

Despite restructuring through bankruptcy in 2009 and successfully paying off loans from the American and Canadian federal governments in April 2010, GM’s profitability has not yet fully rebounded. Its 2.83% profit margin trails the industry average and Ford’s industry-beating 4.27% margin. Like Ford, GM is engaged in significant European restructuring, which is affecting the company’s profitability. Though it cut $300 million in costs in Europe in Q1 2013, GM still lost $175 million on its European operations in the quarter, and after 13 straight years of losses in the region, it doesn’t expect European operations to return to profitability until mid-decade.

With a price discount to its competitors and a strong and still improving position in the Chinese and American auto markets that are primed for growth through 2015, Ford is an attractive buy at current prices.

The article This Automaker Looks Set to Accelerate originally appeared on Fool.com and is written by Colin Tweel.

Colin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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