Ford stock valuation vs Honda

[kris_norway]

Fords marketcap is $40 billion.

Honda Motor Co marketcap is $126 billion.

 

According to yahoo finance, Honda is not at all debt free. Ford got $25 billion in debt.

 

Ford is a bigger worldwide producer than Honda? Margins are coming up to Honda levels.... should Ford atleast not be priced as much as Honda marketcap minus the debt? $126b - $25b = aprox $100 billion marketcap..... which translates to a 120% higher stock valuation.

 

Any thoughts on this valuation dilemma of Ford? What does Honda have that Ford does not?

 

K

[NickF1011]

What does Honda have that Ford does not?

 

A consistent history of continually improving product while returning profits for shareholders. That pretty much covers all of it.

Edited March 3, 2010 by NickF1011

[kris_norway]

So its investor psychology?

 

Because regarding the facts(yahoo finance):

 

Honda:

Total Cash (mrq): 11.96B

Total Cash Per Share (mrq): 3.296

Total Debt (mrq): 47.32B

 

Ford:

Total Cash (mrq): 32.74B

Total Cash Per Share (mrq): 9.901

Total Debt (mrq): 132.02B

 

Of course.. Ford has this debt, but this is included the 95 billion which is under the Ford Credit part. Which is not directly tied to the company. The credit could fail and Ford Motor is on its own. If you remove that, Ford Motor co actually has less debt than Honda.

 

Hondas historic returns makes its 3 x marketcap price of Ford justified?

 

hmm... somebody should have a look at this. I dont know how the Honda Finance arm works, if it is integrated or owned by somebody else.

Edited March 3, 2010 by kris_norway

[NickF1011]

So its investor psychology?

 

Very much so. And common sense. If Ford can demonstrate that they are on the path to consistent returns then their stock price will begin to reflect it more. Confidence in the brand has already driven it up significantly in the past 12 months, but Ford's future at this point is still very uncertain.

[aneekr]

I dont know how the Honda Finance arm works, if it is integrated or owned by somebody else.

It is integrated. Honda's Finance arm is one of four business segments of, and wholly owned by, the parent company Honda Motor Co., Ltd. According to HMC's 2009 Annual Report, its Financial Services Business segment contributed 5.8% of total revenues in FY 2009. (Incidentally, Financial Services was the only one of Honda's four segments that increased net sales beween FY 2008 and 2009).

 

As for HMC share price vs. F share price, NickF1011 explained things very nicely.

[mettech]

Fords marketcap is $40 billion.

Honda Motor Co marketcap is $126 billion.

 

According to yahoo finance, Honda is not at all debt free. Ford got $25 billion in debt.

 

Ford is a bigger worldwide producer than Honda? Margins are coming up to Honda levels.... should Ford atleast not be priced as much as Honda marketcap minus the debt? $126b - $25b = aprox $100 billion marketcap..... which translates to a 120% higher stock valuation.

 

Any thoughts on this valuation dilemma of Ford? What does Honda have that Ford does not?

 

K

 

 

A more diverse portfolio. Motorcycles, lawn mowers/tractors. generators, etc.

 

Honda is an engine company that happens to make cars.

[kris_norway]

Right. How could I forget. Honda is a much wider company..

 

So if we want to compare prices - which company is the best to compare?

 

FORD vs NISSAN ?? or maybe actually Ford vs Toyota. Toyota is 3 x marketcap of Ford - so we could atleast expet a $20 Ford if they keep up???

[jpd80]

Right. How could I forget. Honda is a much wider company..

 

So if we want to compare prices - which company is the best to compare?

 

FORD vs NISSAN ?? or maybe actually Ford vs Toyota. Toyota is 3 x marketcap of Ford - so we could atleast expet a $20 Ford if they keep up???

Market cap is irrelevant.

 

 

You have to think what is driving Ford's increasing stock price. it is genuine change in perception of the company and renewed interest world wide in it products. On average, they now sell at higher margins due to improved product mix. So while Ford stock mightn't reach $20 this year, quite a bit of debt is going to fall away as Ford eliminates VEBA contributions, cuts internal costs and improves profitability.

[banker55]

Fords marketcap is $40 billion.

Honda Motor Co marketcap is $126 billion.

 

According to yahoo finance, Honda is not at all debt free. Ford got $25 billion in debt.

 

Ford is a bigger worldwide producer than Honda? Margins are coming up to Honda levels.... should Ford atleast not be priced as much as Honda marketcap minus the debt? $126b - $25b = aprox $100 billion marketcap..... which translates to a 120% higher stock valuation.

 

Any thoughts on this valuation dilemma of Ford? What does Honda have that Ford does not?

 

K

 

Double check your Honda market cap.I believe Yahoo is wrong....1.85 billion shares at $35 is well under 70 billion in market cap......a market cap that they have earned.

[Edstock]

Any thoughts on this valuation dilemma of Ford? What does Honda have that Ford does not?

Who cares? The market will do what it wants. Your concern about this, and the financial media's fixation on it is one of the reasons US manufacturing companies have been so badly mis-managed.

 

Ford is in business to make cars and sell them at a profit. They are not in business to sell shares, except to raise needed capital.

 

It's all about the product. Build products with value, and eventually share valuation will reflect this.

[NickF1011]

Ford is in business to make cars and sell them at a profit. They are not in business to sell shares, except to raise needed capital.

 

Realistically, those are the same thing though. If Ford can't sell vehicles at a profit, shareholders lose interest and Ford loses the capital it needs to operate.

[mettech]

Who cares? The market will do what it wants. Your concern about this, and the financial media's fixation on it is one of the reasons US manufacturing companies have been so badly mis-managed.

 

Ford is in business to make cars and sell them at a profit. They are not in business to sell shares, except to raise needed capital.

 

It's all about the product. Build products with value, and eventually share valuation will reflect this.

 

 

Do you think the stock prices are discussed during staff meetings?

[kpc655]

Fords marketcap is $40 billion.

Honda Motor Co marketcap is $126 billion.

 

According to yahoo finance, Honda is not at all debt free. Ford got $25 billion in debt.

 

Ford is a bigger worldwide producer than Honda? Margins are coming up to Honda levels.... should Ford atleast not be priced as much as Honda marketcap minus the debt? $126b - $25b = aprox $100 billion marketcap..... which translates to a 120% higher stock valuation.

 

Any thoughts on this valuation dilemma of Ford? What does Honda have that Ford does not?

 

K

 

 

ford's book value is about -2.63/share. so even with a generous amount of goodwill and rosy revenue outlook, 12 dollars is an already astronomical price. consider that when buying stock you're buying assets and earnings. anything else is speculation (gambling).

 

honda's book is about 12/share. same thing though. you'd have to have a very, very optomistic view of future earnings to take the risk on buying at 34/share (34/69 right no)

 

the auto industry is a pretty bad investment. it's highly capital intensive, highly regulated, suffers from over capacity, poor management and union problems (not honda obviously).

 

with a dollar to invest...there are many better options IMO

[jasonj80]

 

union problems (not honda obviously).

 

 

 

Honda still has Unions just not at their plants in the US

[Edstock]

Realistically, those are the same thing though. If Ford can't sell vehicles at a profit, shareholders lose interest and Ford loses the capital it needs to operate.

Realistically, they aren't.

 

A company issues shares to get capital to build what it sells. Shares are not issued, continuously, and if the company is profitable, the retained earnings may be sufficient for any capital investment in physical plant and inventory, plus, a profitable company can borrow money through bonds and debentures without resorting to issuing more shares and diluting the ownership of outstanding share owners.

 

ONE MORE TIME: IT'S ABOUT THE PRODUCT. That's why it's the Ford Motor Company, instead of the Ford Share Company.

 

So, ignore the share hoo-ha and concentrate on the product. Then "Street Forecasts" and "continuous quarterly growth" can be left to the pud-pullers of the financial media and the lemmings who follow their prattle.

[jpd80]

Do you think the stock prices are discussed during staff meetings?

Only as a reflection of how successful Ford was in the past quarter....

Edited March 5, 2010 by jpd80

[kris_norway]

So guys - how far do you think Ford can go?

 

Of course there is no really limit. Depends on the weakening of the dollar also..

 

I think this will go to $20 at start of 2011. Then marketcap is ca 80billion + debt. That will of course then not be a cheap stock.

 

Jim Cramer - says he thinks Ford will become the worlds biggest automaker. That he is on to it - might mean that everybody else should sell now ?.

 

K

[jpd80]

So guys - how far do you think Ford can go?

 

Of course there is no really limit. Depends on the weakening of the dollar also..

 

I think this will go to $20 at start of 2011. Then marketcap is ca 80billion + debt. That will of course then not be a cheap stock.

 

Jim Cramer - says he thinks Ford will become the worlds biggest automaker. That he is on to it - might mean that everybody else should sell now ?.

 

K

 

Jim Kramer is a tool.

 

Show how ridiculous market cap is as a yardstick,

Ford is now $43 billion today....

Edited March 5, 2010 by jpd80

[kris_norway]

Well, in my eyes marketcap is a big deal.

 

No way Toyota could go 10 time from todays valuation. But Ford went 1200% from bottom in 2008.

 

K

[kpc655]

Well, in my eyes marketcap is a big deal.

 

No way Toyota could go 10 time from todays valuation. But Ford went 1200% from bottom in 2008.

 

K

 

But you have to ask why?

 

Did sales increase to justify that?

did assets increase to justify that?

 

you can't focus only on market cap...it's not necessarily a good proxy for VALUE

Edited March 5, 2010 by kpc655

[kris_norway]

NOT MARKETSHARE!!

 

MARKETCAP!

 

Marketcap is the total value of a company noted on the stock exchange. Ford was priced at $4 billion in 2008. Now it is priced at $40 billion. And question is - could Ford be worth $80 billion marketcap? in that case, the stock could double from here.

 

Toyota on the other hand has a marketcap of $127 billion today. Meaning - Toyota can never go 10x from todays stock valuation.

[Edstock]

NOT MARKETSHARE!!

MARKETCAP!

You just don't get it. Market share is the only thing of importance to the future of the Ford Motor Company. If it goes up, Ford builds and sells more motors, and, under their new corporate philosophy, make more money.

 

MARKETCAP! is the only thing of importance to the future of market wankers.

[kpc655]

NOT MARKETSHARE!!

 

MARKETCAP!

 

Marketcap is the total value of a company noted on the stock exchange. Ford was priced at $4 billion in 2008. Now it is priced at $40 billion. And question is - could Ford be worth $80 billion marketcap? in that case, the stock could double from here.

 

Toyota on the other hand has a marketcap of $127 billion today. Meaning - Toyota can never go 10x from todays stock valuation.

 

good catch, fixed my post

 

market cap says nothing of the underlying value. it's merely the price you pay (times shares outstanding).

 

just because something has a price tag of 50 dollars..doesn't mean it's worth 50 dollars.

 

you assume because the price is 40 billion, it's worth 40 billion. if you had 40 billion...would you buy ford? do you think that's money well spent?

 

suggest you go read through annual reports etc. and check that determination.

 

if a house is worth 150k today...but you think it will be worth 250k in the future...do you pay 250k today? if you do, you're relying on some future sucker to pay even more than it's worth (say 350k).

Edited March 5, 2010 by kpc655

[ausrutherford]

Close at $13 even today!

[jpd80]

Toyota on the other hand has a marketcap of $127 billion today. Meaning - Toyota can never go 10x from todays stock valuation.

 

Yes it can but in the other direction.

 

It's frustrating for some of us reading your posts, Ford is on the way back up, we get that but you can't keep comparing Ford to companies that haven't been through restructuring and have long term stable stock prices.....

 

And btw, Ford at $13 is now closer to $44 Billion market cap. There's nothing stopping Ford from issuing new stock to pay down some of their debt, that's the neat trick companies can do that we individuals can't.....

 

 

What is interesting is that Ford is regaining market share (17%) last month on the back of Toyota's problems. The thing is that market share can be another artificial indicator of success, look at GM they are the kings of pump and dump over production and over incentive theory.

Edited March 5, 2010 by jpd80