General Motors Company (GM) is among the largest producers and sellers of cars, trucks and automobile parts globally. Some of the better known vehicle brands produced by the company are: Cadillac, Chevrolet, Buick, and GMC. GM has been struggling with business performance since its rebirth in 2009 after the "old GM" filed for bankruptcy. The new GM tried to modify its methods and attempted to improve, but was only marginally successful..
GM's Financial Performance
The company's financial performance is growing at a slow pace. For the fourth quarter of 2012, GM reported revenue of $39 billion, which increased 3.5% over revenue in the same quarter last year. In the most recent quarter, it had to provide for around $27 billion against impairment of goodwill, and this caused a steep decline in the operating income which stood at -$35 billion.
This was a non-repetitive unusual expense, and should not have any impact on the economic decisions of investors. However, even if the impact of impairment is taken out, the operating loss stands at around $6 billion. The company's income after tax was $0.6 billion, which was also slightly higher than the profit after tax in the same quarter last year.
The following chart represents the financial performance of the company over the past five quarters:
The chart shows that overall financial performance has not grown commendably; however, growth in revenue can be observed.
The major competitors of General Motors are: Ford Motor Company (F) and Toyota Motor Corporation (TM). Both competitors of General Motors hold strong brands, producing tough competition within the industry.
Ford produces vehicles under two main brand names i.e. Ford and Lincoln. Ford's financial performance has been significantly better than that of GM, and this can be evidenced by the fact that Ford reported income before tax of $1.8 billion for the fourth quarter of 2012. Net profit margin of the company was 4.38%, which is significantly higher than the industry average. GM's net profit margin in the same quarter was 1.55%.
Toyota is also a direct competitor of General Motors. Toyota is currently the largest producer of cars in the United States, producing vehicles under a large number of brand names, such as: Corolla, Lexus, Prius, Sienna and Camry. Famous truck brands by Toyota are: Tundra and Tocomo. The company also boasts an impressive market performance with its shares currently being traded around $104. Toyota's profit margin for the fourth quarter of 2012 was 1.2% which is lower than that of GM and Ford.
GM's Market Performance
The market performance of General Motors has remained relatively steady, but it has failed to impress analysts and investors. GM's shares are currently being traded within the range of $27.89 and $28.19, while the 52 week range of the share price of the company is between $18.72 and $30.68. The difference in the 52 week range represents the growth in value of shares in the company over the past year. The following chart represents the market performance of the company over the past year.
The chart indicates that for a significant proportion of the year, the trend of market price of GM's shares has been upward. Although the share price has increased impressively, numerous fluctuations can be observed throughout the year. These fluctuations can be both risky and rewarding for short term investors, causing significant capital losses or gains in short periods of time.
After analysis of GM's financial performance, market performance, and its position against its competitors, in my opinion, investors should hold shares in the company. My belief is that the company is still recovering slowly, and improvement in its financial performance can be expected in the prospective periods. The current position is weak; therefore buying the shares at this point will be very risky. It would be a feasible decision for investors to hold the investments and closely follow the financial and market performance of the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.