2 Stocks With Sustainable Growth

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If you follow the investing world at all, you've likely heard the Warren Buffett quote: "Be fearful when others are greedy and greedy when others are fearful." You can apply that to many different situations in the investing world and it will serve you well. I applied it to a situation recently in which I felt that two stocks were unfairly undervalued, and asked whether it was time to scoop up some shares while others are fearful of them? There's definitely a bearish case to be made about each stock, but I'll show you why each one has sustainable, profitable growth ahead.

First up
Ford has long been a favorite of mine; even after its recent climb in stock price, I feel it's undervalued. In my opinion it's undervalued mainly due to the dismal outlook from Europe, which weighs heavily - an estimated $2 billion in losses - on the balance sheet. Here's why I think investing in Ford now could be a good play.

Growth
Its new global platforms of vehicles have been successes, every single one. The Fiesta, Focus and F-Series are all in the top six in global sales. The Fusion, which has had more success than the Fiesta and Focus in the U.S., is just now entering Europe and China. Ford will be introducing 15 models into China by 2015, expecting to double its market share as the region quickly expands. The growth story is compelling, but is profitability sustainable now? 


Sustainable
Ford is well ahead of its competitors in creating economies of scale. It's running plants at or near capacity, helping U.S. margins maintain 11% - a strong number in the auto industry. It's expecting to get its number of platforms down to nine by the end of this year, allowing it pricing power through its suppliers. It's estimated that Ford can break even at U.S. automotive sales as low as 10 million a year now. Cost-cutting measures are already in place, and only improving; growth seems secure, and it definitely seems sustainable.

Last but not least
Boeing is an intriguing play that could rebound with the global economy and increased air travel. A common bearish argument I hear is that with government defense cuts looming, it could have a big effect on Boeing's profitability. While those cuts definitely will have an impact, I think future growth in its commercial airline business - where it derives 60% of its revenues - could outweigh the loss of defense money.

Growth
Boeing has estimated that, as developed markets replace existing aircraft fleets and emerging markets increase air travel, future aircraft demand will be worth almost $4.5 trillion over the next 20 years. Considering that Boeing and competitor Airbus have a duopoly on the market for large commercial aircraft, that demand will equal a nice chunk of change for growth potential. However, what can Boeing promise investors that is sustainable - not just potential - growth?

Sustainable
We're in luck! Boeing has a massive backlog of orders and deliveries to produce - equaling nearly $400 billion. If you want to compare that to its annual sales, it's roughly 4.5 times this year's estimate. That's about as sustainable as growth gets. Four years of guaranteed sales? Sign me up. 

Bottom line
Both of these companies have bear cases to be made against them, but I like the future sustainable profits they have in line. I think both are undervalued and may take some time to appreciate to the stock prices they deserve. If you're a long-term investor, this could be a reason to research more. If you decide to invest, while you're waiting, know that both happen to offer dividends to help make your trip a little more enjoyable.

Want more analysis on Boeing?
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The article 2 Stocks With Sustainable Growth originally appeared on Fool.com.

Motley Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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