Toyota Motor Corporation (ADR) (TM), Netflix, Inc. (NFLX), and Wednesday’s Top Upgrades & Downgrades

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All in all, I see IBM as a great company, but one that’s not worth the 16.5 enterprise value to free cash flow ratio that its current share price implies. While UBS’s promised 10%, one-year profit from the shares could happen, I wouldn’t bet on it.

Have you driven a [Toyota] lately?
Toyota Motors Corporation (ADR) (NYSE:TM) and Ford Motor Company (NYSE:F) are feuding today over Ford’s claim that its “Focus” became the world’s top-selling sedan in 2012. (Toyota Motors Corporation (ADR) (NYSE:TM) says the winner is Corolla). This morning, though, analysts at Guggenheim came out firmly in favor of the incumbent.

Regardless of whether Ford Motor Company (NYSE:F) took top honors for sales of a single class of car, Guggenheim thinks Toyota Motors Corporation (ADR) (NYSE:TM) stock is a buy, and initiated coverage of Toyota Motors Corporation (ADR) (NYSE:TM) with this rating Wednesday. But is Guggenheim right?

On the surface, the case seems open and shut. Toyota Motors Corporation (ADR) (NYSE:TM) shares, at 17.6 times earnings, cost nearly twice as much as Ford at a 9.1 P/E. Toyota’s also carrying a bigger debt load, and paying a dividend yield less than half of Ford’s generous 3.1% payout. Advantage: Ford.

On the other hand, Toyota has a few factors in its favor as well. The company generated $6.6 billion in positive free cash flow last year, which was nearly twice Ford’s $3.6 billion cash haul. And most analysts polled see Toyota growing its profits in excess of 40% per year over the next five years as it rebounds from a sales slump, and capitalizes on an export-friendly, weakened Yen. Ford’s projected growth rate, in contrast, is a relatively plodding 10.5%.

In short, if growth estimates prove out in both cases, Guggenheim probably has a point here. Ford looks like the cheaper stock today — but Toyota’s future is brighter.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Ford and Netflix. The Motley Fool owns shares of Ford, International Business (NYSE:IBM) Machines, and Netflix.

The article Wednesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com.

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