Ford May Need A More Definite Route

Jul.12.14 | About: Ford Motor (F)

Summary

Ford has lukewarm revenue and revenue growth.

Ford is one of the largest car manufacturers in the world, and participates heavily in the global market.

Ford is operating in a market with growing demand, but the stock doesn't show any strong signs indicating it should be purchased.

Ford Motor Company (NYSE:F) is the quintessential American car company. Ford from days of old has been a paragon of efficiency and equitability; the conveyor belt system allowed people to specialize and produce quality vehicles with great efficiency. As it stands now, Ford is an international producer of vehicles and a potential investment. Ford's stock price hovered around $30 at the turn of the millennium - it's barely over $17 now. Let's take a look at the numbers behind Ford to see whether the stock can be entered for profitability.

Fundamentals

If you look at the way the stock has moved in the last several years, it should come as no surprise that Ford has had erratic revenue behavior in the recent past. You can see that the subprime mortgage crisis and the recession that followed had a dampening effect on Ford's revenue's and revenue growth. Since then it seems to have had several good quarters, with downturns owing to the cyclical nature of its business.

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Source: YCharts

Although Ford did not fare well during the recession, the company didn't accrue excess liabilities during that time. Ford actually had declining liabilities and, judging by the company's current ratio, managed to get rid of inventory consistently. The cyclical nature of producing and selling vehicles becomes readily apparent from the chart. Towards later years, the current ratio oscillates around a smaller space, indicating that Ford may be moving inventory in a more efficient manner.

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Source: YCharts

Further testament to Ford's improving efficiency is the firm's rising asset utilization ratio; Ford is operating at significantly higher asset utilization than it was several years ago.

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Source: YCharts

Market

Ford is no longer just an American company - the firm relies heavily on international sales to generate revenue. Luckily, the global demand for vehicles has been increasing steadily:

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Source: Statista

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Ford is a company of healthy size: the firm has a market capitalization of $69 billion and is one of the largest car manufacturers in the world. As mentioned earlier, however, the company floundered in the wake of the recession. Cars are fairly expensive commodities and may be vulnerable to shocks in the financial system and an underperforming economy.

Conclusion

Ford appears to be in a state of equilibrium; its finances aren't bad but they're not investment grade, either. It's being managed smoothly, moving inventory quickly and doing well within the international market. The nature of Ford's makes it tied to certain aspects of the economy; it could be possible that it experiences excellent growth as America's, and the world economy, continues past the recession. The numbers at this point don't justify the stock as a buy; I would say it's best to hold off from entering the stock until the company is taking a more definite route in terms of profitability.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.