The electric vehicle (EV) market in the United States is growing rapidly. Next year, the industry is expected to expand further due to less expensive EVs hitting the market and favorable government rules making them relatively affordable.
Renowned automaker General Motors Company (GM) should benefit from the market expansion. The company has multiple expected EV rollouts in 2023. GM is anticipated to debut the Chevrolet Equinox EV and the Chevrolet Blazer EV next year.
Additionally, the company expects its growing EV portfolio to be robustly profitable in North America by 2025, as GM aims to scale its EV capacity in the region to more than 1 million units annually.
GM projected fiscal 2022 adjusted EBIT to be between $13.5 billion and $14.5 billion, compared to its previous guidance between $13 billion and $15 billion. Its revenue is expected to grow at a 12% compound annual rate through 2025, reaching more than $225 billion.
However, the stock has declined 3.8% over the past six months and 4% over the past three months to close its last trading session at $33.32.
Here are the factors that could influence GM’s performance in the upcoming months:
Strong Financials
For the fiscal third quarter that ended September 30, GM’s revenue increased 56.4% year-over-year to $41.89 billion. Net income attributable to stockholders rose 36.6% from the prior-year quarter to $3.31 billion. Adjusted EBIT and adjusted EPS improved 46.7% and 48% from the prior-year period to $4.29 billion and $2.25, respectively.
Discounted Valuation
In terms of its forward Price/Sales, GM is trading at 0.31x, 63.1% lower than the industry average of 0.83x. The stock’s forward Price/Book multiple of 0.71 is 71.9% lower than the industry average of 2.53. In terms of forward Price/Cash Flow, it is trading at 2.49x, 75.9% lower than the industry average of 10.33x.
Favorable Analyst Estimates
The consensus EPS estimate of $1.68 for the current quarter (ending December 2022) indicates a 24.4% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $40.63 billion reflects an improvement of 21% from the prior-year period.
Street revenue and EPS estimates for the current year (fiscal 2022) of $154.24 billion and $7.19 reflect 21.4% and 1.7% year-over-year increases, respectively. GM’s EPS is estimated to grow 15.7% per annum over the next five years.
POWR Ratings Reflect Promising Prospects
GM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. GM has an A grade for Growth, in sync with its improving financials. The stock has a Value and Sentiment grade of B, consistent with the lower-than-industry valuation multiples and favorable analyst estimates.
In the 62-stock Auto & Vehicle Manufacturers industry, it is ranked #18.
Click here to see the additional POWR Ratings for GM (Momentum, Stability, and Quality).
View all the top stocks in the Auto & Vehicle Manufacturers industry here.
Bottom Line
GM’s EV rollouts in the wildly growing EV market should help the company boost its top line. Moreover, analysts expect significant upsides in the company’s bottom line. Therefore, the stock might be a solid buy now.
How Does General Motors Company (GM) Stack up Against Its Peers?
While GM has an overall POWR Rating of B, one might consider looking at its industry peers, Isuzu Motors Limited (ISUZY) and Honda Motor Co., Ltd. (HMC), which have an overall A (Strong Buy) rating.
GM shares fell $0.02 (-0.06%) in premarket trading Wednesday. Year-to-date, GM has declined -42.95%, versus a -18.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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