With Ford Motor Company (NYSE:F) stock price down by about 14.7% from its 52-week high, there are questions of weather Ford remains a worthy investment. The economic uncertainties in china, which have taken its toll on the US markets, have also affected Ford. However, Ford stock is undervalued at present levels and investors shouldn’t ignore the opportunity here.
The market seems to be missing the greatest opportunity in Ford: its focus on delivering measurable long-lasting value to its customers. The company’s One Ford strategy is the current medium through which the company is delivering the said value at the moment. Here are the plans of One Ford – as stated on Ford’s website.
- Aggressively restructure to operate profitably at the current demand and changing model mix
- Accelerate development of new products our customers want and value
- Finance our plan and improve our balance sheet
- Work together effectively as one team
We’ll consider the second plan – making products that customers want and value. Before going ahead, I’d like to point out that before the One Ford strategy was introduced, Ford was known for making autos with solid build, the major reason why the F-150 is America’s best-selling pickup truck. So the tweak to be made via this goal is to build autos with sleeker design, better fuel economy without suffering on performance and build.
Evident from sales figures, Ford has been delivering on that promise. Looking at the already impressive F-150 won’t accurately judge how much work Ford has done in this regard. I’ll point you to models like Fusion, Edge and Explorer.
Fusion
Fusion currently competes with Toyota Motor Corp Ltd Ord (NYSE:TM) Camry, as automobile experts have been comparing the 2015 models of the two autos. This is quite a turnaround for Fusion, considering that as of 2008, Fusion sales were nowhere near that of Camry. In 2008, Camry sold 289,048 units more than Fusion (just 10,952 units shy of the 300,000-unit sales difference mark). In 2014, however, that difference has shrunk to 121,746 units – a 167,302-unit improvement on the 2008 difference.
What changed? First, Ford used the financial crisis to improve the fuel efficiency of its autos, including Fusion. According to fueleconomy.gov, the 2008 model of Camry has a combined 25 MPG fuel economy, compared with Fusion’s 23 MPG fuel economy for the same-year model. For the 2015 models, however, Camry only improved fuel economy to 28 MPG while Fusion now offers fuel economy of 29 MPG. Granted real-world scenarios might differ based on a combination of factors. However, there has still been an impressive improvement.
Edge
In August of this year, Edge sales increased 36% year-over-year. This, combined with impressive redesigned Explorer sales, helped Ford post the best monthly SUV sales for any month in the last 144 months. According to automobile experts, Ford redesigned Edge just as it has been doing over the past few years. Ford is already leading the way with turbocharged engines, especially with EcoBoost. Ford’s idea is to make small engine act big, which helps reduce the auto weight, a prerequisite for booting fuel economy. However, turbocharged engines aren’t without their own shortcomings.
The original build of turbochargers make turbo lag and high boost thresholds unavoidable. However, Ford is gradually removing these problems from the ‘negatives’ column by introducing a new twin-turbocharged, 2.7-liter V-6 in the new Edge Sport. A The Car Connection expert says the new twin-turbocharged engine offers quicker performance than the 3.7-liter naturally aspirated V-6 for the previous Sport version, with a relatively lag-free driving experience.
I believe this quite embodies Ford’s dedication to providing value. I expect that such technique used to solve these problems with the new Edge will gradually be introduced in other autos in Ford’s lineup.
The fact that Ford even offers attractive financing options with easy payment plans would tip the scale in Ford’s favor with customers as the economy improves further.
Investor Takeaway
With Ford currently trading at seven times forecasted 2016 earnings and 0.38 times sales, Ford stock is undervalued. Ford, as shown with the improvement in Edge, will continue to provide value, thereby, increasing its market share. It’s time for investors to buy (more) stocks of Ford.