Ford Motor Company (F) is one of the major producers of cars and trucks in the world, and the company has been on the road to recovery for some time. Recently, Ford seems to be entering the profitability zone once again as the company is reporting strong sales and higher profits. There are a number of factors that justify Ford's positive prospects. Some of those factors are: positive financial performance, positive market performance, and growth in business. Following is a brief review of some of the factors pointing toward Ford's bright prospects.
Ford's Financial Performance
The financial performance of Ford Motor Company for the fourth quarter of 2012 has been significantly better than expected. The company reported earnings of $0.31 per share against the analysts' estimate of $0.25 per share. The significance of this profit can be evidenced from the fact that it is the highest pre-tax profit reported by Ford in more than a decade. The main reason behind the increased profits is the increase in sales of F-series pickup trucks in North America. The total revenue for the quarter was $36.5 billion, which was $1.9 billion higher than the company's revenue in the same quarter last year. A significant proportion of the revenue was generated from the operations in North America. The net income before tax for the quarter was $1.8 billion, while it was $1.5 billion for the same quarter last year. The net profit margin of 4.38% is also above the industry average.
Although the net income of the company has increased, the gross profit margin is still low. Ford's gross profit margin currently stands at 16.7%, having decreased from the same quarter last year. The following chart represents the company's financial performance over the past five quarters.
The chart reveals that the revenue of the company has increased in the most recent quarter. The decrease in profit margin when compared to Q4 2011 is due to the fact that the tax expense was reversed in that quarter, causing a rise in after-tax profit.
The two main competitors of Ford Motor Company are: Toyota Motor Corporation (TM) and General Motors Company (GM). Toyota is a direct competitor of Ford as both the companies produce cars and trucks. Toyota is currently the largest producer of cars in the United States and it also boasts an impressive market performance with its shares currently being traded around $104. Toyota's profit margin for the fourth quarter of 2012 was 1.2%, which is significantly lower than that of Ford which stands at 4.38%.
General Motors Company is also a direct competitor of Ford, but it is a smaller competitor when compared to Toyota. Some of GM's well-known brands include: Cadillac, Buick, and Chevrolet. The profit margin of GM for the fourth quarter of 2012 was 1.55%, which is still lower than that of Ford, but higher than that of Toyota. Currently, Ford's shares are being traded at around $27.94.
Ford's Market Performance
Ford's market performance has been positive in the past few weeks, as the share price is following an upward trend. The current share price is within the range of $12.89 and $13, while the 52-week range of the share price of the company has been between $8.82 and $14.30. The following chart represents Ford's market performance over the past year.
The chart indicates that the share price declined steeply at the start of the year, and it remained low for a few months; however, it has started to recover recently.
After analysis of Ford's performance, in my opinion, investors should buy the shares in the company. I believe there are sufficient factors pointing toward the prospective growth of Ford. The higher-than-average net profit margin indicates the company's financial strength, and the rising market value of shares indicates that the market welcomes the positive growth in Ford's performance. Therefore, the same trend can also be expected for the prospective periods.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.