Is GM’s 43% Rally in 2025 Backed by Real Value After EV Partnerships?

• Wondering if General Motors is a bargain hiding in plain sight? If you’re intrigued by what the market might be missing, you’re in the right place.
• GM’s stock has made waves lately, climbing 43.1% year to date and 33.7% in the past year. This signals shifting optimism and a fresh look at its potential.
• Part of this renewed interest stems from headlines about GM’s strategic partnerships in electric vehicles and expanding investments in autonomous technologies. These stories have added energy to the stock, drawing both new interest and some debate about its long-term value.
• The company scores a strong 5 out of 6 in our quick valuation check. Let’s break down what’s behind that number and, before we finish, explore a more insightful way to look at whether GM is really undervalued or not.

General Motors delivered 33.7% returns over the last year. See how this stacks up to the rest of the Auto industry.

Approach 1: General Motors Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) analysis estimates a company's value by projecting its expected future cash flows and discounting them back to today's dollars. This method helps investors understand what the business might be worth based on anticipated cash generation over time.

For General Motors, the DCF model starts with the latest twelve months' free cash flow of $13.4 billion. Analysts have offered projections out to 2029, with free cash flow expected to reach $9.5 billion in that year. Beyond analyst estimates, future years are extrapolated, with cash flows growing modestly into the next decade.

Simply Wall St's two-stage DCF model calculates General Motors' fair value at $96.39 per share. This is a notable premium over the current market price, indicating the stock is trading at a 23.7% discount compared to its estimated intrinsic value. In summary, by the numbers, General Motors appears to be significantly undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests General Motors is undervalued by 23.7%. Track this in your watchlist or portfolio, or discover 919 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for General Motors.

Approach 2: General Motors Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool for profitable companies because it compares a stock’s price with its actual earnings power. For steady earners like General Motors, the PE ratio is helpful for assessing whether investors are paying a reasonable amount for each dollar of profit generated.

What is considered a “normal” PE ratio often depends on the company’s expected growth and risk profile. Higher growth companies may justify a higher PE, while firms with more uncertainty or slower prospects generally trade at lower ratios.

Right now, General Motors trades at a PE ratio of 14.4x. That is lower than both the Auto industry average of 18.4x and the average of similar peers at 25.2x. On paper, this suggests the stock could be undervalued relative to others in the sector.

To move beyond these comparisons, Simply Wall St calculates a proprietary “Fair Ratio.” This figure (in this case, 19.7x) estimates the most appropriate PE for GM by factoring in its growth rate, profit margins, market size, industry dynamics, and risk profile. Unlike basic peer or industry benchmarks, the Fair Ratio provides a more tailored, context-rich gauge of value. This makes it a useful metric for investors seeking clarity amid market fluctuations.

With GM's PE at 14.4x and a Fair Ratio of 19.7x, the valuation is noticeably below what would be considered reasonable for a business of its caliber and outlook.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your General Motors Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your own story or perspective on a company that sits behind the numbers. In other words, it is how you tie together your beliefs about General Motors’ future revenue, profits, margins, and the business environment to arrive at your own fair value, instead of simply relying on analyst consensus or recent headlines.

Narratives work by connecting the company’s big picture, such as electric vehicle expansion, cost-cutting initiatives, and shifting industry trends, to specific financial forecasts, and then translating those projections into a fair value. This makes your investment decisions more dynamic and grounded in your personal research, not just the latest price moves.

Best of all, Narratives are an easy-to-use tool on Simply Wall St’s Community page, where millions of investors share their perspectives, and each Narrative updates automatically as new news, earnings, or business results come in. With Narratives, you can quickly see at a glance whether your fair value (or that of others in the community) is above or below the current share price, helping you decide when to buy, hold, or sell, based on your outlook.

For example, some General Motors Narratives are bullish, projecting a fair value as high as $80.00 if EV growth and margins outperform. More cautious Narratives see value down at $38.00 if risks around costs or tariffs materialize, highlighting how different stories lead to different conclusions.

Do you think there's more to the story for General Motors? Head over to our Community to see what others are saying!

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.

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