Ford Shares Could Double Over the Next Few Years

| About: Ford Motor (F)

I love a good growth stock. Who doesn’t? Growth stocks are a great way to make money investing. Finding companies whose growth potential outweighs its current valuation is getting more and more difficult in this market. The Dow and S&P 500 are up and to put it frankly, many companies are starting to get expensive. I have managed to find one rather well known company whose shares appear to be trading very cheap despite the rise over the past year.

That company is Ford (NYSE:F).

Ford is my absolute favorite American automaker stock.

Here’s what I like about Ford.

  • Shares trade at 8.65 times earnings.

  • Shares trade at just 8.3 times forward earnings.

  • The stock is selling at just 0.45 times earnings growth.

  • The stock is selling at 0.46 times sales.

  • Revenue is growing again at $133 billion dollars compared to 3 straight years of negative growth.

  • Positive free cash flow the past 2 years, after a brutal 2008.

  • EPS has more than doubled. (Before that there were 3 straight years of negative EPS)

  • Rising gross margins and operating margins. (19.3% and 5.3% respectively which are the highest since 2004)

  • ROA improving at 3.02%. (That’s low but better than the 1% the previous year)

  • Ford is improving its balance sheet. (Cash increased to $32 billion and long term debt decreased to $65 billion dollars)

  • Current ratio of 2.3 and a quick ratio of 2.4.

  • Double digit earnings growth expected at 19%.

There are some negatives. The company still has a book value of -.40 cents and revenue did decline 3% last quarter.

I would conservatively place a 12 multiple on Ford which is in line with its automotive competitors. I would discount the projected earnings growth to 15%. Using those metrics, Ford would earn $2.51 in 2012 and $2.89 in 2013. That would place the stock’s value at $34.75. That’s roughly double where it is today.

Disclosure: I do own shares of Ford.