At US$53.91, Is It Time To Put General Motors Company (NYSE:GM) On Your Watch List?

Today we're going to take a look at the well-established General Motors Company (NYSE:GM). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on General Motors’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for General Motors

What Is General Motors Worth?

Great news for investors – General Motors is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that General Motors’s ratio of 5.39x is below its peer average of 17.33x, which indicates the stock is trading at a lower price compared to the Auto industry. What’s more interesting is that, General Motors’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from General Motors?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for General Motors, at least in the near future.

What This Means For You

Are you a shareholder? Although GM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to GM, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on GM for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing General Motors at this point in time. To that end, you should learn about the 3 warning signs we've spotted with General Motors (including 2 which are significant).

If you are no longer interested in General Motors, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.