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Are Investors Undervaluing General Motors (GM) Right Now?

Zacks Equity Research
Virtu Financial (VIRT) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is General Motors (GM). GM is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 5.77. This compares to its industry's average Forward P/E of 9.44. Over the last 12 months, GM's Forward P/E has been as high as 7.05 and as low as 5.15, with a median of 6.14.

GM is also sporting a PEG ratio of 0.68. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. GM's industry has an average PEG of 0.95 right now. Within the past year, 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 1.22. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.29. 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 1.30.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. GM has a P/S ratio of 0.35. This compares to its industry's average P/S of 0.69.

Finally, investors will want to recognize that GM has a P/CF ratio of 2.44. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 6.02. Over the past 52 weeks, GM's P/CF has been as high as 8.51 and as low as 2.13, with a median of 5.88.

Value investors will likely look at more than just these metrics, but the above data helps show that General Motors is likely undervalued currently. And when considering the strength of its earnings outlook, GM sticks out at as one of the market's strongest value stocks.


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