RE: Bullish Technicals
Is Ford’s Stock Price Sustainable?
By Edward Niedermeyer on December 22, 2009
The Wall Street Journal’s Liam Denning figures it isn’t. He writes:
Ford expects to resume profitability in 2011, and the consensus forecast is for per-share earnings of $1.13. The implied price/earnings multiple of 8.6 times doesn’t sound too demanding. But as Chris Ceraso of Credit Suisse points out, it translates to a margin of earnings before interest, tax, depreciation and amortization of nearly 10%, something Ford hasn’t enjoyed since the late 1990s.
Such margins aren’t impossible, and Mr. Ceraso sees potential increases in Ford’s valuation to almost $13 a share under this scenario. But this assumes a vehicle market of 14.5 million in 2011, up from about 10.5 million this year, and Ford gaining an extra 1.3 percentage points of market share. At 13.5 million units and a more modest market-share rise, Mr. Ceraso’s model spits out a valuation of about $6 or $7 a share.