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Since a 2009 low of 10.4M US vehicle sales, the auto industry has been rallying nicely. Every year since 2009 auto sales have increased, and were up 40% in 2012 from 2009 lows.

General Motors (NYSE:GM) is notorious for taking a good portion of America's corporate blame during the '08 recession. The government was forced to bailout the company to avoid a full blown bankruptcy, and save at least some of the company's employees.

After going through a corporate restructuring to help cut costs and increase profitability (with the help of the government), GM IPO'd again in late 2010.

Shares are actually still down 20% from the IPO and have been lagging behind all the major indices for as long as they've been trading.

Despite this horrible trading action, there has actually been a real shift in GM's financial position in the past 3 years. Sales have risen 14% from 2010-2012, and GM finally looks well positioned for long term profitability.

Earnings per share came in at $3.24 for 2012, a decline from 2011, but the outlook for 2013 appears to be calling for growth.

2013

The US auto market is off to another very strong start in 2013, and looks like 2012's 14.4M units sold will be beaten. US car sales are on track to sell between 15-15.5M cars this year. The US is one of GM's major markets and will be key to sustaining growth.

China is the real growth driver for GM. Several of GM's US brands have been experiencing real success in China, and GM is looking to expand its reach within the country going forward.

The company recently appointed a new leader for its Cadillac brand in China, and has guided for sales to triple by 2015. Typically, Chinese consumers have shown preferences towards German luxury car brands, but GM is determined to change that.

So far in 2013 China sales are up 8% (YoY in January and February), and continue to be gaining steam. GM is currently in the process of building 2 different Chinese assembly plants (operational by 2014) to greatly increase its production capabilities in the region.

Valuation

GM's stock is very cheap, most likely because the market hasn't forgiven it for the company's 08 collapse. On a P/E basis shares are trading at just 8.2, significantly lower than the S&P.

Earnings growth is projected to accelerate in 2014, analysts currently have EPS rising 29% YoY from 2013. The consensus EPS for 2014 is $4.37 per share, implying a forward P/E of 6.4.

The market is clearly still skeptical about GM's future and how realistic its growth projections may be. This undeserved skepticism has created a significant divergence between GM's fundamental operations and the stock price.

If GM can continue growing in China and follow climbing US auto sales then shares will warrant a higher premium. Even at just 10x 2014 EPS the stock would trade at $44 per share, implying theoretical upside of 57% in the next 9 months. But 2014 isn't the end of GM's growth, China and the US both could have growing auto markets for the next decade.

In conclusion, a revamped GM offers significant investment opportunities. Especially to those who believe the market is unfairly giving the stock a post '08 hangover, and that auto market will continue to grow in the future.

Source: GM Could Have A 50% Upside Thanks To Rising U.S. Auto Sales And China