Are Investors Undervaluing General Motors (GM) Right Now?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
General Motors (GM) is a stock many investors are watching right now. GM is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 6.07, which compares to its industry's average of 10.13. Over the past 52 weeks, GM's Forward P/E has been as high as 7.05 and as low as 5.15, with a median of 6.14.
Investors should also note that GM holds a PEG ratio of 0.72. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. GM's PEG compares to its industry's average PEG of 1.03. Over the last 12 months, GM's PEG has been as high as 1.28 and as low as 0.61, with a median of 0.74.
Investors should also recognize that GM has a P/B ratio of 1.29. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. GM's current P/B looks attractive when compared to its industry's average P/B of 2.46. Over the past 12 months, GM's P/B has been as high as 1.78 and as low as 1.05, with a median of 1.34.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GM has a P/S ratio of 0.38. This compares to its industry's average P/S of 0.77.
Finally, our model also underscores that GM has a P/CF ratio of 2.58. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. GM's current P/CF looks attractive when compared to its industry's average P/CF of 6.52. Within the past 12 months, GM's P/CF has been as high as 8.51 and as low as 2.13, with a median of 6.21.
These are just a handful of the figures considered in General Motors's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that GM is an impressive value stock right now.
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