Driven by robust demand for its trucks and SUVs, General Motors (NYSE:GM) has expanded its U.S. market share lately. Retail sales for the automaker grew by nearly 4% last year, with the GMC, Cadillac, and Buick divisions showing particularly strong results. Last month, GM declared a significant 25% dividend increase to $0.15 per share, aligning it with that of its rival Ford Motor, and also unveiled a $6 billion stock buyback initiative. Still, its stock hasn’t seen much of growth lately, down 6% this year. Also see – Time To Buy Ford Stock At $10?
At its current levels of around $50, GM stock looks undervalued, making it a potentially attractive investment opportunity. However, we believe there are several major concerns with GM stock that investors should carefully consider, despite its seemingly low valuation.
We arrived at our conclusion by thoroughly analyzing GM’s current valuation against its operating performance in recent years and examining both current and historical financial conditions. Our comprehensive assessment of General Motors across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—reveals that the company demonstrates significant weaknesses in both operating performance and financial condition, as detailed below.
However, for investors who seek lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does General Motors’ Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, GM stock looks very cheap compared to the broader market.
• General Motors has a price-to-sales (P/S) ratio of 0.3 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 4.0 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 2.6 vs. the benchmark’s 24.3
How Have General Motors’ Revenues Grown Over Recent Years?
General Motors’ Revenues have seen notable growth over recent years.
• General Motors has seen its top line grow at an average rate of 14.0% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 9.1% from $172 Bil to $187 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 11.0% to $48 Bil in the most recent quarter from $43 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is General Motors?
General Motors’ profit margins are worse than most companies in the Trefis coverage universe.
• General Motors’ Operating Income over the last four quarters was $13 Bil, which represents a poor Operating Margin of 6.8% (vs. 13.0% for S&P 500)
• General Motors’ Operating Cash Flow (OCF) over this period was $20 Bil, pointing to a moderate OCF-to-Sales Ratio of 10.7% (vs. 15.7% for S&P 500)
Does General Motors Look Financially Stable?
General Motors’ balance sheet looks weak.
• General Motors’ Debt figure was $131 Bil at the end of the most recent quarter, while its market capitalization is $52 Bil (as of 3/21/2025). This implies a very poor Debt-to-Equity Ratio of 252.9% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $27 Bil of the $280 Bil in Total Assets for General Motors. This yields a moderate Cash-to-Assets Ratio of 9.7% (vs. 14.8% for S&P 500)
How Resilient Is GM Stock During A Downturn?
GM stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• GM stock fell 53.0% from a high of $65.74 on 4 January 2022 to $30.87 on 11 July 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $60.20 on 25 November 2024 and currently trades at around $50
Covid Pandemic (2020)
• GM stock fell 52.4% from a high of $35.29 on 20 February 2020 to $16.80 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 20 October 2020
Putting All The Pieces Together: What It Means For GM Stock
In summary, General Motors’ performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Weak
• Financial Stability: Very Weak
• Downturn Resilience: Extremely Weak
• Overall: Weak
Overall, considering its significantly undervalued price point, we believe GM presents an attractive investment opportunity. GM’s electric vehicle (EV) strategy is showing promising results. While the company has built its recent success largely on traditional combustion engine vehicles, it is experiencing robust growth in its EV sales. In 2024, GM secured its position as the second-largest player in the EV market with 12% market share, trailing only Tesla. Notably, GM’s market share doubled over the past year.
Tesla continues to maintain leadership in the U.S. EV market, while Chinese manufacturers are steadily gaining ground by offering compelling combinations of advanced technology and competitive pricing. Although GM achieved an impressive 50% surge in EV sales last year, these vehicles still represent only approximately 8% of its total U.S. sales volume, indicating significant room for growth in this segment.
While GM stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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