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fullsecurityanalysis.docx
Running head: FULL SECURITY ANALYSIS 1
FULL SECURITY ANALYSIS 11
Abstract
This paper will discuss financial information for Ford Motor Co. (F), including a little background on this company. The items that will be covered in the rest of this paper is how Ford came to be, where they are currently, and that they are the fifth (5th) largest auto maker. Some other things this paper will cover are their operations, annual revenue, financial position, and a trend analysis of the balance sheet. Overall this paper will leave the audience with an understanding of how this company is doing in the market. As well as, make an informed decision on whether or not to invest in Ford Motor Co. (F). As the paper continues there will be other information about the company and how it is currently doing within its competitive market. Some of the vocabulary that will be used within this paper are as follows and listed below.
Keywords: Ratio, Stocks Beta, Profit Margins, Portfolio, Revenue, Dividends, and Yield
Organizational Overview
Ford Motor Co. was founded by Mr. Henry Ford in a small suburb in Michigan, and he incorporated the company in 1903. At this time Mr. Ford had very few investor’s, to be exact there were a dozen investor’s and 1000 shares. Even though this company had spent most of its cash investment the company was able to turn a sizable profit when they sold their first vehicle. (Ford Motor Company Timeline/ Ford.com, 2015) Ford is a multinational automaker who owns several different other manufacturers including a Brazilian SUV manufacturer, as well as, other manufacturers in other countries. Ford also has joint-ventures in Japan, China, Taiwan, and Thailand and other places. Ford Motor Co. is also currently listed on the New York Stock Exchange and the Ford family controls it, even though they have a minority ownership. (McCaffrey, March 31, 2016; last edited April 12, 2016)
Over the years this company has presented and brought into the play different methods/ways of producing/manufacturing vehicles. Ford Motor co. has done this with highly trained engineers that use innovative technology to manufacture these vehicles with a very skilled workforce. Ford was close to bankruptcy when the financial crisis hit, and since then had been an extremely profitable company. Ford Motor Co. did go public in 1956 with the Ford family still holding almost 50% of the voting rights. (McCaffrey, March 31, 2016; last edited April 12, 2016)
Summary of Operations
Table 1
Summary of Operations
|
|
12/31/2015 |
12/31/2014 |
12/31/2013 |
|
Total Revenue |
$149,558,000 |
$144,077,000 |
$146,917,000 |
|
Growth of Revenue |
3.80% |
-1.93% |
9.43% |
|
Net sales |
$140,566,000 |
$135,782,000 |
$139,369,000 |
|
Gross Margin |
15.42% |
11.35% |
16.25% |
|
Operating Margin |
5.11% |
0.23% |
8.72% |
|
Income prior to taxes |
$10,252,000 |
$1,234,000 |
$14,371,000 |
|
Net Income |
7,373,000 |
$1,231,000 |
$11,953,000 |
|
|
The above information for this chart was retrieved from the Yahoo!Finace (https://finance.yahoo.com/quote/F/financials?ltr=1)
Ford’s yearly revenue for the fiscal year that ended 2015, shows an increase of 3.8% which leads to $149,558,000 million, which was better than was accomplished the previous year. The company’s growth rate for sales has definitely improved from the -1.93% in the fiscal year for 2014. The above chart shows the net sales being $140.57 billion, compared to the $135.78 billion for year-end January 2015. Then shows the operating income of $7.65 billion, compared to the $332 million year end January 2015. The income that comes from continuing operations prior to income taxes was $9.51 billion, and that’s compared to $2.51 billion year end January 2015. Going forward the growth for total of all revenues is viewed as too volatility over the period of three (3) years. The growth sales in previous years has shown to have dire decreases in revenues, and then a growth in a positive path by the time 2015 came around.
Financial Position
Table 2
Financial Position
|
|
12/31/2015 |
12/31/2014 |
12/31/2013 |
|
Working Capital |
$125,198,000 |
$111,804,000 |
$112,054,000 |
|
Net Property |
$57,256,000 |
$53,343,000 |
$47,600,000 |
|
Total of Assets |
$224, 925,000 |
$208,615,000 |
$202,179,000 |
|
Stockholders’ Equity |
$28,642,000 |
$24,438,000 |
$26,112,000 |
|
Net Income |
$7,373,000 |
$1,231,000 |
$11,953,000 |
|
|
Looking at the working capital for this company, it is in good standing. The working capital over the three (3) time period has shown a positive which has been consistent. This shows us that this company is able to pay its debts, and current liabilities on time. The investments that the company has in properties, and equipment has been increasing since 2013. ( the above information for the chart came from Yahoo!Finance( https://finance.yahoo.com/quote/F/financials?ltr=1)
Horizontal Analysis
|
Ford Motor Co. (F) Trend Analysis of Condensed Income Statement |
||||||
|
|
|
Amounts |
|
|
Percentages |
|
|
|
12/31/15 |
12/31/14 |
12/31/13 |
12/31/15 |
12/31/14 |
12/3113 |
|
Total Revenue |
$149, 558,000 |
$144, 077,000 |
$146,917,000 |
101.80% |
98.07% |
100% |
|
Cost of Revenue |
$126,495,000 |
$127,724,000 |
$123,050,000 |
102.80% |
103.80% |
100% |
|
Gross Profit |
$23,063,000 |
$16, 353,000 |
$23,867,000 |
96.63% |
68.52% |
100% |
|
Operating Income or Loss |
$7,647,000 |
$332,000 |
$12,809,000 |
59.70% |
2.59% |
100% |
|
Net income |
7,373,000 |
$1,231,000 |
$11,953,000 |
61.68% |
10.30% |
100% |
(The above information for this was retrieved from Yahoo!Finance (https://finance.yahoo.com/quote/F/financials?ltr=1)
As it shown in the chart the sales numbers were down for a while between 2013 until 2014, however, the cost of the company’s sales went up. This was because the gross profit went down in 2014, which is different from 2013. The company’s operating expenses, and its operating profit was also down, therefore, making the net income that was available for its stockholders 10.30%. The company’s stance was better 2015 and the sales were better along with the cost of revenue that went down slightly. Ford’s gross profit went up to 96.63% compared to what it was in 2014. (The above information for this was retrieved from Yahoo!Finance (https://finance.yahoo.com/quote/F/financials?ltr=1)
|
Ford Motor Co. (F) Trend Analysis of Condensed Balance Statement |
||||||
|
|
|
Amounts |
|
|
Percentages |
|
|
|
12/31/15 |
12/31/14 |
12/31/13 |
12/31/15 |
12/31/14 |
12/3113 |
|
Total Current Assets |
$145,470,000 |
$131,839,000 |
$131,585,000 |
110.55% |
100.19% |
100% |
|
Total fixed assets |
$79,455,000 |
$76,776,000 |
$70,594,000 |
112.55% |
108.76% |
100% |
|
Total Asset |
$224,925,000 |
$208,615,000 |
$202,179,000 |
111.25% |
103.18% |
100% |
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
$20,272,000 |
$20,035,000 |
$19,531,000 |
103.79% |
102.58% |
100% |
|
Long term Liabilities |
$1,149,000 |
$1,054,000 |
$1,891,000 |
60.76% |
55.74% |
100% |
|
Total Liabilities |
$21,421,000 |
$21,089,000 |
$21,422,000 |
100% |
98.45% |
100% |
|
Total Stockholder Equity |
$28,642,000 |
$24,438,000 |
$26,112,000 |
109.69% |
93.59% |
100% |
(The above information for this was retrieved from Yahoo!Finance (https://finance.yahoo.com/quote/F/financials?ltr=1)
Looking at the company’s balance sheet above you can see that it has consistently increased the last three (3) years. Ford Motor Co. did have a decline in their long-term liabilities, but had an increase in 2015. Therefore, this didn’t increase the stockholders’ equity in net income. (The above information for this was retrieved from Yahoo!Finance (https://finance.yahoo.com/quote/F/financials?ltr=1)
Analysis of Cash flows
|
Period Ending |
12/31/15 |
12/31/14 |
12/31/13 |
|
Net Income |
7,373,000 |
1,231,000 |
11,953,000 |
|
Operating Activities, Cash Flows Provided by or Used in |
|
|
|
|
Depreciation |
7,966,000 |
7,423,000 |
6,544,000 |
|
Adjust. To Net Income |
-1,507,000 |
4,424,000 |
-6,222,000 |
|
Changes in Accounts Receivables |
-3,563,000 |
-2,896,000 |
-1,913,000 |
|
Changes in Liabilities |
7,758,000 |
5,729,000 |
1,232,000 |
|
Changes in Inventories |
-1,155,000 |
-936,000 |
-437,000 |
|
Changes in other Operating Activities |
-700,000 |
-467,000 |
-706,000 |
|
Total Cash Flow from Operating Activities |
16,170,000 |
14,507,000 |
10,444,000 |
|
Investing Activities, Cash Flows Provided by or Used in |
|
|
|
|
Capital Expenditures |
-7,196,000 |
-7,463,000 |
-6,597,000 |
|
Investments |
37,751,000 |
38,348,000 |
32,498,000 |
|
Other Cash Flows from Investing Activities |
-56,717,000 |
-52,009,000 |
-45,632,000 |
|
Total Cash Flows From Investing Activities |
-26,162,000 |
-21,124,000 |
-19,731,000 |
|
Financing Activities, Cash Flows Provided by or Used in |
|
|
|
|
Dividends Paid |
-2,380,000 |
-1,952,000 |
-1,574,000 |
|
Sale Purchase of Stock |
-129,000 |
-1,964,000 |
-213,000 |
|
Net Borrowings |
17,148,000 |
7,314,000 |
9,663,000 |
|
Other Cash Flows from Financing Activities |
-317,000 |
25,000 |
257,000 |
|
Total Cash Flows From Financing Activities |
14,322,000 |
3,423,000 |
8,133,000 |
|
Effect of Exchange Rates Changes |
-815,000 |
-517,000 |
-37,000 |
|
Change In Cash and Cash Equivalents |
3,515,000 |
-3,711,000 |
-1,191,000 |
(The above information for this was retrieved from Yahoo!Finance (https://finance.yahoo.com/quote/F/financials?ltr=1)
Ford Motor Co. cash flow from the operating activities shows a rise from 2013 to 2015. The net income didn’t go up during the three (3) year period, but it did see a lot ups and downs and variations. The properties and equipment went up consistently during this period of three (3) years and more assets were bought. The company used cash to pay dividends, as well as, to buy stocks. Take notice that the company didn’t raise cash from things like financing long-term debt, or sale of common stock. (The above information for this was retrieved from Yahoo!Finance (https://finance.yahoo.com/quote/F/financials?ltr=1)
Comparison of Company performance with Industry
|
|
Company |
Industry |
|
Price/Earnings (TTM) |
5.68 |
-5.18 |
|
Price/Book (MRQ) |
1.70 |
3.82 |
|
Price/Cash Flow (MRFY) |
3.20 |
7.74 |
|
Dividend Yield |
4.74% |
0.00% |
|
Net Profit Margin (TTM) |
5.35% |
7.90% |
|
Return on Equity (TTM) |
31.18% |
23.96% |
|
Debt to Equity (MRQ) |
NA |
55.14 |
· MRQ = Most Recent Quarter
· TTM = Trailing Twelve Months
· MRFY = Most Recent Fiscal Year
Ford Motor’s price/earnings ratio is definitely better than the industry’s ratio. Price/book ratio is lower than the industry value, and the market price is undervalued when compared to the book value. Ford’s dividend ratio is greater than the industries ratio, but the company has a constant consistent payout of dividends that raised the price of the company. Looking at the company’s earnings ratio/profit margin is lower than the industry. This happened because of the variation in sales over the last three (3) years. If you look at Ford’s ROE (return on equity) it is higher than the industry.
Ratio Analysis
Liquidity Ratios
A company’s current ratio is able to give a perception of or feeling of efficiency of the operating cycle and/or the company’s ability to turn the product it makes into cash. When a firm has issues trying to collect money on its receivables or has a longer inventory turnover rate it means that it has liquidity issues. This is because they aren’t able to meet their obligations in a timely manner. It is common sense and useful when comparing companies that are in the same industry. This is because each industry is different, you wouldn’t compare an automaker to a pharmaceutical company because it wouldn’t make sense to do that. A healthy industry is usually rated between a 1 and 3 and this is considered a healthy for businesses, as well as, acceptable.
|
|
|
Ford Motor Co. |
|
|
|
2015 |
2014 |
2013 |
|
Liquidity ratios: |
|
|
|
|
Current Ratio |
7.18 |
6.58 |
6.48 |
|
Quick Ratio |
6.77 |
6.19 |
6.34 |
Ability for this company’s liquidity shows a current ratio of 2 and it’s quick ratio is a 1. These ratios are great but they really don’t need to keep the liquidity ratios that high. The amount of investments really could be turned into fixed assets.
Asset Management Ratios
The managing of asset ratios is the company’s venture to measure its success in how it manages its assets so it can turn them into sales. This can give an informative view to the company’s credit policies, and how it manages its inventory overall.
|
|
|
Ford Motor Co. |
|
|
|
2015 |
2014 |
2013 |
|
Asset Management ratios: |
|
|
|
|
Inventory Turnover |
23.35 |
22.52 |
21.47 |
|
Days Sales Outstanding |
237.70 |
228.17 |
210.74 |
|
Fixed Asset Turnover |
4.96% |
4.99% |
5.59% |
|
Total Asset Turnover |
0.69 |
0.70 |
0.75 |
· Inventory Turnover for this company has shown improvement between 2013 - 2015
· The turnover rate for sales outstanding shows that they are based on credit and depending on how long the credit is extended to some of the consumers can be too high. Ford should try to reduce this.
· The net fixed asset turnover rate which is the activity ratio has been lowered for the last 3 years.
· Ford Motor Co. total ATR (asset turnover ratio) has declined for the last 3 years.
Debt Management
These ratios are a company’s way to measure how it uses financial leverage and how well it avoids financial turmoil when looking at the long-term.
|
|
|
Ford Motor Co. |
|
|
Debt Management Ratios |
2015 |
2014 |
2013 |
|
Debt Ratio |
0.872 |
0.881 |
0.869 |
|
Debt-to-Equity Ratio |
3.14 |
3.23 |
2.90 |
|
Times Interest Earned |
14.26 |
6.36 |
9.45 |
|
|
|
|
|
Because the total assets are so high, this will make the risk go up for Ford Motor Co. There would be a balance between the risk and return on the company if these were the same. Ford should try to come up with ideas on how to make their debt part lower, since its capital structure is currently around 80% right now.
Profitability Ratios
This is another measure that companies use to see how successful they are in making income.
|
|
|
Ford Motor Co. |
|
|
|
2015 |
2014 |
2013 |
|
Profitability ratios |
|
|
|
|
Profit Margin |
5.11% |
0.23% |
8.72% |
|
Basic Earning Power |
4.90% |
0.97% |
7.52% |
|
Return on Assets |
3.40% |
1.55% |
3.65% |
|
Return on Equity |
25.7% |
5.0% |
45.8% |
Here we see that the profit margin went down severely between 2013 and 2014, however, it went back up in 2015. The BEP (basic earnings power) did the same thing, it went down between 2013 and 2014, and went back up in 2015. ROA (return on assets) and its ROE (return on equity) and did the same as the two previous mentions. The company’s profitability is affected by how much it earns, and the company should look into this matter.
References
Ford Motor Company Timeline/ Ford.com. (2015). http://corporate.ford.com/company/history.html
McCaffrey, C. (March 31, 2016; last edited April 12, 2016). F-Ford Motor Company. Retrieved July 31, 2016, from http://stockaholics.net/threads/f-ford-motor-company.16/
Http://finance.yahoo.com/quote/F/financials?ltr=1
http://csimarket.com/stocks/singleY_growth_rates.php?code=F&rev
http://financials.morningstar.com/ratios/r.html?t=F
