Popular car maker General Motors Company (GM) is focusing on expanding its electric vehicle (EV) portfolio amid growing demand. It expects its new electric vehicle profits to be in-line with cars and trucks with traditional engines by 2025.
Moreover, in 2020, the company said it would release at least 30 new EVs globally by 2025, including more than 20 just for North America.
GM’s Chair and CEO Mary Barra said, “Our multi-brand, multi-segment, multi price point EV strategy gives us incredible leverage to grow revenue and market share, and we believe our Ultium Platform and vertical integration will allow us to continuously improve battery performance and costs.”
Moreover, GM recently signed a long-term nickel supply agreement with Vale Canada Limited, a subsidiary of Vale S.A. (VALE), to amplify the North American EV supply chain. This deal is expected to help GM reach its target of building 1 million EVs annually in North America, beginning in 2025.
GM has lost 32.6% year-to-date and 36.1% over the past year to close the last trading session at $39.52. However, it has gained 12.9% over the past month.
GM’s forward EV/Sales of 0.97x is 10% lower than the industry average of 1.08x. Its forward Price/Sales of 0.36x is 57.5% lower than the 0.86x industry average.
Here is what could shape GM’s performance in the near term:
Solid Financials
GM’s Automotive sales and revenue came in at $38.70 billion for the third quarter that ended September 30, 2022, up 65.2% year-over-year. Its total net sales and revenue came in at $41.89 billion, up 56.4% year-over-year.
Moreover, its adjusted net earnings came in at $3.28 billion, up 47.5% year-over-year, while its adjusted EPS came in at $2.25, up 48% year-over-year.
Favorable Analyst Expectations
Analysts expect GM’s revenue to increase 21.4% year-over-year to $154.22 billion in 2022 and 3.9% year-over-year to $160.16 billion in 2023. Its EPS is expected to rise 15.7% per annum for the next five years.
Also, the stock surpassed EPS estimates in three of four trailing quarters. Moreover, Wall Street analysts expect the stock to hit $46.54 soon, indicating a potential upside of 17.8%.
Mixed Profitability
GM’s trailing-12-month gross profit margin of 13.56% is 62.1% lower than the industry average of 35.76%. Its trailing-12-month ROTC and ROTA of 4.23% and 3.71% are 36.4% and 20.8% lower than the industry averages of 6.65% and 4.69%, respectively.
However, its trailing-12-month EBITDA margin of 12.24% is 10.8% higher than the industry average of 11.05%, while its trailing-12-month net income margin of 6.57% is 28.4% higher than the industry average of 5.12%. Moreover, its trailing-12-month ROCE of 14.45% is 7.8% higher than the industry average of 13.40%.
POWR Ratings Reflect Promising Outlook
GM has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GM has an A grade for Growth, consistent with its solid financials in the latest reported quarter. It has a B grade for Sentiment and Value, in sync with favorable analyst expectations and lower than industry valuation multiples, respectively.
In the 61-stock Auto & Vehicle Manufacturers industry, GM is ranked #20.
Click here for the additional POWR Ratings for GM (Momentum, Stability, Quality).
View all the top stocks in the Auto & Vehicle Manufacturers industry here.
Bottom Line
GM reported solid financials in its latest quarter despite the macro headwinds. As the company tries to solidify its position in the EV market amid growing demand, its growth outlook looks bright.
Moreover, the stock is trading above its 50-day and 200-day moving averages of $36.86 and $38.61, respectively. Therefore, GM could be an ideal Buy.
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, Subaru Corporation (FUJHY), Mazda Motor Corporation (MZDAY), and Honda Motor Co., Ltd. (HMC), which have an overall A (Strong Buy) rating.
GM shares were trading at $39.99 per share on Tuesday morning, up $0.47 (+1.19%). Year-to-date, GM has declined -31.64%, versus a -15.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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