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Should Value Investors Buy General Motors (GM) Stock?

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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, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now is General Motors (GM - Free Report) . 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 6.07. This compares to its industry's average Forward P/E of 9.75. Over the past 52 weeks, GM's Forward P/E has been as high as 7.05 and as low as 5.15, with a median of 6.14.

We also note that GM holds a PEG ratio of 0.72. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. GM's industry currently sports an average PEG of 1. GM's PEG has been as high as 1.28 and as low as 0.61, with a median of 0.74, all within the past year.

Another valuation metric that we should highlight is GM's P/B ratio of 1.29. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 2.36. GM's P/B has been as high as 1.78 and as low as 1.05, with a median of 1.34, over the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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 0.36. This compares to its industry's average P/S of 0.72.

Finally, we should also recognize that GM has a P/CF ratio of 2.58. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. GM's current P/CF looks attractive when compared to its industry's average P/CF of 6.26. Over the past year, GM's P/CF has been as high as 8.51 and as low as 2.13, with a median of 6.21.

These are just a handful of the figures considered in General Motors's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that GM is an impressive value stock right now.




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