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Ford's Valuation: The Mystery Deepens

Summary

Barron's calls for 25% upside, excluding the near 5% yield.

Free cash flow is four times the dividend commitment.

We are looking at buying some shares very soon.

We recently wrote an article about Ford's (NYSE:F) valuation and as is typical with Ford articles, the comments stream was filled with passion. Ford has been reporting pretty good numbers, has a great yield of 4.60%, and the valuation is low. But still the stock has not found many friends, especially among the big boys who move the market. That is, until now.

Barron's upside:

Barron's has come to the rescue of Ford and General Motors (NYSE:GM), calling a 25% upside to both the stocks as covered by Seeking Alpha here. One particular piece of Barron's article caught our attention as explained below.

Free cash flow strength:

The chart below shows Ford's free cash flow over, in millions, the last four years and the increasing pattern is easy to see as the free cash flow has more than doubled since 2012. However, given all the recent concerns about sales slowing down, investors need to temper their expectations over the next few years. This is not to say that there will be no growth in free cash flow but it's hard to see a double as we did over the last four years.

Source: YCharts.com

But...


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