General Motors Company (GM), Toyota Motor Corporation (ADR) (TM): Which Automaker Should You Invest In?

Competition

Data from Morningstar and Financial Visualizations on June 17, 2013

After appreciating approximately 65% since 2011, Toyota Motor Corporation (ADR) (NYSE:TM)’s share price is a staggering $118.69. Based on the industry average P/E and P/B of 14.6 and 1.7, respectively, Toyota looks overvalued while Ford and General Motors Company (NYSE:GM) show potential for growth. Based on timing, Ford and General Motors Company (NYSE:GM) could both be profitable investments. Based on Ford’s cheap share price and comparatively better performance than General Motors Company (NYSE:GM), it seems to be a better pick. Furthermore, GM does not provide a dividend after its financial collapse of 2009 which gives Ford and Toyota and inherent advantage.

Final thoughts

The first five months of the year have shown promising signs of growth for the automobile industry – especially the American automakers. GM has a large consumer base in China and a slowdown in the Chinese economy, as is being reported, will hurt its sales badly. Ford, on the other hand, has chosen to cut back on its market share to stop bleeding cash.

While Toyota tries to combat in the North American market with a new Corolla, it is highly unlikely that consumer trends will shift direction from Ford’s brilliant new range offerings. Ford has also taken measures to reduce demand in Europe and minimize losses till the economic conditions improve. In my opinion, Ford is primed to make big gains due to the innovative product line up it is providing. Ford is a Buy for long-term investors.

Marina Avilkina has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Marina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Which Automaker Should You Invest In? originally appeared on Fool.com is written by Marina Avilkina.

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