Should You Buy It? Goodyear Tire & Rubber

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Goodyear Tire & Rubber (GT - commentary - Cramer's Take) has been plagued by high energy costs and declining auto sales for several quarters, but the world's third-largest tire-maker has seen some signs of recovery in 2009.

At Wednesday's closing price of $7.69, the shares are up 17.59% year-to-date. Still, that's a far cry from the 52-week high of $30.10.

On Wednesday, Goodyear was upgraded from neutral to overweight. The analyst cited improving sales volume and a favorable shift in margins given a 50% drop in raw materials costs from the peak in mid-2008.

With that in mind, I'm here to answer readers' questions: Should you buy it? Is Goodyear already pricing in a lot of good news or can the stock continue to move higher over the coming quarters?

The first thing I looked for at Goodyear was its balance sheet. At the end of 2008, the company had $1.89 billion of cash and equivalents, compared with $4.68 billion of debt. That's a hefty 458% of shareholders' equity, and Goodyear's bonds are rated B+ by Standard & Poors, which is junk status.

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David Peltier is a research associate at TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback; click here to send him an email.

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