It seems like investors are not giving General Motors (GM) any credit. After coming out of bankruptcy in 2010 as a leaner organization, the stock has been in a downward motion. However, there are a number of reasons to be optimistic on the stock. April monthly auto sales, which are due out tomorrow, are expected to be "strong." According to the Seeking Alpha article, there are several factors that appear to suggest April could be a solid month, thanks in part to improved consumer sentiment in the U.S., favorable weather conditions, and a push toward more fuel efficient vehicles. Some analysts predict the April sales reports may be among the strongest since 2007.
On the valuation side, everything looks good as all of the valuation metrics suggest that the stock is significantly undervalued. Analysts are very bullish and investors seem to be underestimating the earnings power of the new GM by assigning it a forward P/E of just 4.9. Below is an in depth look at the valuation metrics and stock chart.
Valuation: General Motors' trailing 5 year valuation metrics suggest that the stock is undervalued as there the valuation metrics are at or below compared to their 5 year averages. General Motors' current P/B ratio is 1.3 and it has averaged 1.5 over the past year with a high of 2.2 and low of 0.9. General Motors' current P/S ratio is 0.3 and it has averaged 0.3 over the past year with a high of 0.4 and low of 0.2. General Motors' current P/E ratio is 5 and it has averaged 7 over the past year with a high of 12.7 and low of 4.3.
Price Target: The consensus price target for the analysts who follow General Motors is $35. That is upside of 54% from today's stock price of $22.9 and suggests that the stock is undervalued at these levels. This also suggests that the stock has significant upside and is an attractive opportunity at these levels.
Forward Valuation: General Motors is currently trading at about $23 a share with analysts expecting EPS of $4.64 next year, an earnings increase of 27% y/y, for a forward P/E ratio of 4.9. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Ford (F) is currently trading at about $11 a share with analysts expecting EPS of $1.72 next year, an earnings increase of 18% y/y, for a forward P/E ratio of 6.5. Toyota (TM) is currently trading at about $82 a share with analysts expecting EPS of $6.6 next year, an earnings increase of 213% y/y, for a forward P/E ratio of 12.4. Honda (HMC) is currently trading at about $36 a share with analysts expecting EPS of $3.54 next year, an earnings increase of 148% y/y, for a forward P/E ratio of 10.2. The mean forward P/E of General Motors' competitors is 9.7 which suggests that General Motors is undervalued relative to its publicly traded competitors.
Earnings Estimates: General Motors has beat EPS estimates 3 times in the past 4 quarters. The company's EPS figures have come in between -2 cents and 34 cents from consensus estimates or about -4.9% to 28.3% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: General Motors is down 26.7% over the past year, underperforming the S&P 500, which is up 5.3%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $25.10 and below its 200 day moving average, which sits at $23.88.