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Why General Motors May Be A Great Long-Term Investment

Alexander Vester profile picture
Alexander Vester


  • General Motors appears undervalued based on the present price of about 5.6 times the earnings of 2016.
  • GM's focus on future growth.
  • GM's share repurchase program, worth $14 billion, benefits the long-term investor.

During the past years, many major indexes have reached new highs because of the growing stock prices. General Motors (NYSE:NYSE:GM), however, has not shared in this boom in the same way. During the past three years, the automaker's stock has been traded around the same price range, despite the company's improved earnings.

ChartGM data by YCharts

Of course, today's investor does not profit from past growth and earnings but in General Motors' case, there is reason to believe in even more growth in the future. General Motors puts a lot of effort into improving profit margins and create growth:

Cost Efficiencies:

General Motors is paying a lot of attention to reduce costs and improve efficiency to drive further growth in the future. The automaker's cost efficiency target is 6.5 billion through 2018. They already have achieved reducing their costs by $4 billion. This will both have great short-term and long-term effects for General Motors because it will improve their current and future results but they will also get much better positioned throughout the business cycle.

New Products:

A great way to more growth is through new products. General Motors knows the importance of new product launches and is focusing a lot on building new, better, and more safer cars. Last year General Motors launched an electric vehicle, the 2017 Chevrolet Bolt EV that differentiates from other electric vehicles because of the combination of long range (238 miles on a full charge) and an affordable price ($30,000 after government incentives).

Besides the Chevy Bolt EV, General Motors launched, and is still launching, many new cars. At the moment, there is a greater demand for crossovers, which General Motors is also reacting to, by launching 4 new crossovers this year, like the Chevrolet Traverse, Chevrolet Equinox and GMC Terrain.

Growth from other

This article was written by

Alexander Vester profile picture
I'm an individual investor, trying to find businesses selling below their intrinsic value. My investment framework is heavily influenced by Warren Buffett, and Graham & Dodd.

Analyst’s Disclosure: I am/we are long GM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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