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Ford Motor Co. Message Board

  • topinvestgun1 topinvestgun1 Oct 26, 2011 11:00 PM Flag

    Is Ford debt a concern?

    I am considering Ford for it's low P/E. However, what's holding me back is the debt ratio is almost 3 times the market cap, at 98B. If it can generate free cash flow of 7-8B a year with, say, an optimistic boost to 14B, still it will take 7 years before it can clear its debt. The current ratio at 1.2 looks healthy. Price/book value of 8.9 is extremely expensive, one will get nothing if it liquidates.

    Can anyone who have done analysis comment on its debt and consider it a buy? I understand car industry requires large capital expenditure upfront by leveraging debt. This is exactly what get GM into trouble when sales vanish and the debt strangled the giant. I need convincing evident before invest in it. It's present price is assuming 20% growth year over year. It's very expensive to me.

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