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Why did Ford Motor Company's (F) stock hit the gas pedal?
F has had a difficult start this year, losing 18.5% of its worth since the beginning of the year. hey finally found the gas pedal and floored it. Ford's stock is up by 6.6%
Ford (the chairman) spent $4.5 million to buy 267,697 shares of Ford (the stock) at an average price of $16.81 per share. This was his first insider buy of the year and it appears to have come at a good moment. He's made a handsome profit of 5.5% in just five days, or around 1 percentage every day.
So far, everything has gone well. Will Ford's stock continue to rise? That is the question that investors should be asking. Thankfully, I feel the answer to this question is affirmative.
Consider this: Ford's net profits were about $18 billion last year. Given that more than half of that profit came from one-time things that are unlikely to happen again, I wouldn't buy Ford now merely on the basis of its P/E ratio.
However, Ford's free cash flow (FCF) is a very respectable $9.5 billion and when compared to the company's market capitalization of $67 billion, that works out to a price-to-FCF ratio of only 7.0, which strikes me as a very attractive price to pay for a company with growing profits and a strong 2.4% dividend yield.
To summarize, Bill Ford's recent insider acquisition of Ford shares was the right decision for him and outside investors should strongly consider following in his footsteps.
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