Today we're going to take a look at the well-established General Motors Company (NYSE:GM). The company's stock saw a decent share price growth of 20% on the NYSE over the last few months. The recent jump in the share price has meant that the company is trading around its 52-week high. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on General Motors's outlook and valuation to see if the opportunity still exists.
What Is General Motors Worth?
Good news, investors! General Motors is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that General Motors's ratio of 4.85x is below its peer average of 17.18x, which indicates the stock is trading at a lower price compared to the Auto industry. Although, there may be another chance to buy again in the future. This is because General Motors's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will General Motors generate?
NYSE:GM Earnings and Revenue Growth May 14th 2024
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of General Motors, it is expected to deliver a negative earnings growth of -9.0%, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although GM is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to GM, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on GM for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you'd like to know more about General Motors as a business, it's important to be aware of any risks it's facing. For example, General Motors has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.
If you are no longer interested in General Motors, you can use our free platform to see our list of over 50 other stocks with a high growth potential.