Ford Motor Company (F), The Goodyear Tire & Rubber Company (GT): Three Stocks to Invest in the Improving Auto Market

From a fundamental perspective, the company’s margins have been steadily improving since 2010.  The Goodyear Tire & Rubber Company (NASDAQ:GT) hopes to increase its North American margins to 5% from 3% over the next several years. The company’s P/E of 17.3 is below the industry average of 20.2. Although its sales fell 12% to $4.8 billion last quarter, its net income increased $37 million because of margin expansion.

Auto parts

Magna International Inc. (USA) (NYSE:MGA) designs, develops, and manufactures automotive systems, modules, and components which are sold to original equipment manufacturers (OEMs). Its operations are primarily in North America, Europe, and several emerging markets such as Latin America.

The fundamentals look good as the company trades around an 11 P/E, while the industry average is 19.9. Its price to book ratio is also below the industry average. Further, revenue growth for the last 3 years is 21%, while the industry average is 4.5%. Its sales increased 9% to $8.5 billion for the first quarter of 2013. Its net income grew to $369 million, or $1.57 per share, from $343 million, or $1.46 per share year over year.

Management expects revenue in 2013 to range between $32 billion to $33.4 billion as a new emission standards boost demand for fuel efficient components. Moreover, since its presence in the domestic and European markets is strong, sales should move in unison with Ford.  Magna International Inc. (USA) (NYSE:MGA) has a solid balance sheet, trades below the industry average in many financial metrics, and has catalysts for growth.

A foolish note

The automotive industry is improving. And these companies are excellent options to gain exposure to this market. Ford’s performance has been steadily increasing, and the car maker should gain market share in the European markets.  As the demand for tires increase, The Goodyear Tire & Rubber Company (NASDAQ:GT) should see a push in revenue. Lastly, the demand for Magna International Inc. (USA) (NYSE:MGA)’s products should increase as companies like Ford boost auto production to meet rising global demand.


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

The article 3 Stocks to Invest in the Improving Auto Market originally appeared on Fool.com is written by Robinson Roacho.

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