6). Growing Importance of Asia-Pacific: In 2010, Asia-Pacific only accounted for 15% of overall volume, however this region is projected by the company to account for 32% of volume by 2020, and the growing importance of Asia-Pacific will present an incredible opportunity for the company to meet rising demand
1). Consumer Confidence Decay: A car is a major purchase for any consumer, and in times of weak consumer confidence, people are less likely to make a huge investment such as a car, posing a major threat to Ford’s core business
2). Rising Input Prices: Ford utilizes hundreds of materials to manufacture their automobiles, and if any of the company’s input prices were to rise, Ford’s margins would be threatened
Major publicly traded competitors of Ford include Toyota Motor Corporation (ADR) (NYSE:TM), General Motors Company (NYSE:GM), Honda Motor Co Ltd (ADR) (NYSE:HMC), and Tesla Motors Inc (NASDAQ:TSLA). All of these companies operate in the automotive industry and compete directly with Ford. Toyota is valued at $162.46 billion, pays out a dividend yielding 1.45%, and carries a price to earnings ratio of 19.74. General Motors is valued at $37.93 billion, does not pay out a dividend, and carries a price to earnings ratio of 9.51. Honda is valued at $67.69 billion, pays out a dividend yielding 2.25%, and carries a price to earnings ratio of 17.43. Tesla is valued at $4.21 billion, does not pay out a dividend, and carries a negative price to earnings ratio.
The Foolish Bottom Line:
Financially, Ford is relatively solid. The company possesses solid revenue growth, a strong free cash flow position, and a growing dividend. The company’s debt position is compensated through the historically low valuation the company is currently trading at. Looking to the future, Ford is likely to derive growth from its Asia Pacific region, while growth lags in Europe and the United States. All in all, Ford is an extremely cyclical company, prospering during times of growth and suffering during downfalls, and in the end will only preserve investments, not grow them.
The article Is This A Company Investors Should Be Driving to Solid Returns? originally appeared on Fool.com and is written by Ryan Guenette.
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