Is Ford Finally Getting Into Gear?

| About: Ford Motor (F)

The recovery of Ford Motor Co. (NYSE:F) has been slower and more tortuous than those of rivals General Motors (NYSE:GM) and Chrysler, which got government bailouts. The lack of a bailout made Ford stock a favorite here for a while, but it hasn't made it a better investment. Over the last year GM is up 19%, Ford just 6%.

Seen from a shorter-term perspective, however, Ford looks better. Over the last three months, Ford's 13.44% appreciation has topped that of GM and even Toyota Motor (NYSE:TM). Despite this, its market cap of $42.69 billion is much less than six months' of sales, which usually average $65 billion. Through the first three quarters of 2012 it has brought just 5% of revenue to the bottom line, its balance sheet shows a fairly steady 50% debt-to-assets ratio, and it's running at about $10 billion in free cash flow right now.

The last month has been a tough one. Its big hybrids aren't living up to their mileage promises, it's been downgraded by analysts, and it's had to recall 90,000 of its 2013s because the new EcoBoost engine can be a fire hazard.

So there is a bearish case to be made. The company has to get back into the luxury market -- it has to bring back the Lincoln brand -- if it is to have a long-term future. The plan is to link a midsized MKZ sedan to the big limos of the 1950s and, frankly, I'm skeptical. But stranger things have happened -- look at what Eminem did for Chrysler.

What Ford represents to today's car buyer isn't luxury or efficiency. It's power. Putting a diesel engine inside full-size Transit vans looks like a winner to me. Almost one-third of its sales are of the F-Series truck, which has power to burn. I think the power image is why Ford sales are so strong in China -- there's a market for big, and it's a big market.

So Ford has a niche. Ford has profits. Ford has a future. Ford has already earned $1/share in profits in 2012, and the fourth quarter has yet to be heard from. If it can just equal last quarter's 41 cents per share for the Christmas season, you're looking at a P/E of 8. I think that's cheap as chips.

Disclosure: I am long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.