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GM Sells Opel

 

 

Fundamentally, one can say General Motors is moving in the right direction and we might even start seeing some growth in its future. At the moment the company is looking at a large total debt of 84.62 billion USD, 12.96 billion USD in cash on account, and ROE around 22 %

 

Many analysts agree that GM is a very good opportunity for the long term investors

According to analysts GM's European Opel-Vauxhall brand sale is a positive move. GM's European business has been losing money on a constant basis. Given the European auto market environment GM was never likely to turn the business around, so selling it was the right move. The S&P 500 has an average P/E of 24.67, but a number of stocks are valued at less than 10x earnings (GM is one of them). GM's focus on cost cutting, streamlining its businesses, and investing capital in profitable markets are catalysts for increasing profits in 2017. GM will likely continue strong performance in North America & China. For fiscal-year 2016, GM set records for revenue, earnings per share, and cash flow. This was a result of strong performance in North America and China. According to a January 2017 press release, GM expects its earnings per share to increase to $6.00-$6.50 for the upcoming year. In 2017, the company also expects to maintain or improve its EBIT-adjusted margins on higher revenues, which will generate approximately $6.0 billion of automotive adjusted free cash flow.

When we look at the one year chart we can see that price of GM stock is moving in "uptrend". As long the price is above this trend line and $35 this stock is in the "BUY" zone and  there is no indication of trend reversal. If the price falls on the trendline and if we get "bullish" confirmation candle it would be a very good entry point. Trend lines represent a very strong support level, if the price breaks this trend line( and $35) it would be a very strong "SELL" signal and we have an open way to $30. If the price jumps above $38 (short term resistance level) that would be a confirmation of "BULLISH" trend and open way to $40.

Our Conclusion

  • GM's European Opel-Vauxhall brand sale is a positive move
  • For fiscal-year 2016, GM set records for revenue, earnings per share, and cash flow
  • GM expects its earnings per share to increase to $6.00-$6.50 for the upcoming year
  • GM's balance sheet still has issues (underfunded pension position - which currently stands at $18.3 billion, down from $21.2 billion in 2015, total debt is very big and potential investors should always keep on eye this debt)
  • If the auto market stays strong (or even flat), GM is priced at a huge discount. The market might have topped out in the United States, but large markets like China are still seeing growth (this stock is better opportunity than Tesla)
  • The stock has reached $38 for the first time in roughly two years and $40 represents next target and resistance level
  • The technical indications are improving and price of the stock could reach 40 USD very soon
  • As long the price is above this trend line,  this stock is in the "BUY" zone and there is no indication of trend reversal
  • If the price falls, every price in a range from 25 USD - 30 USD is a very good opportunity to invest in GM, and investors could earn 30% in some period in next 3 years

Summary (from latest annual report – 2016)

  • Total stockholders' equity  : 43.83 billion USD
  • Market Cap is 56 billion USD ( last price of the stock is 37.27 USD)
  • General Motors Company designs, builds and sells cars, trucks and automobile parts. The Company also provides automotive financing services through General Motors Financial Company
  • Total stockholders' equity  has increased from 35.45 billion USD in 2014 to 43.83 billion in 2016
  • Company has 12.96 billion USD in cash on account (2016 annual report)
  •  In 2016 company has 55.6 billion USD long-term debt, short – term debt is 29.02 billion USD                                                                                                                                                            (In 2014 company had 14.98 billion USD short-term debt , long-term debt was 31.85 billion USD)
  • In latest annual report - stockholders' equity  has increased to 43.83 billion  USD from 35.45 billion USD in 2014, total debt is 84.62 billion USD in 2016)
  • Company's revenue increased in 2016 to 166.38 billion USD from 152.35 billion in 2015
  • Net income in 2016 was 9.42 billion USD, Net income in 2015 was 9.68 billion USD
  • In 2016 company paid 2.36 billion usd dividend to its shareholders (In period from 2012 to 2015 GM paid 5.8 billion USD dividend to its shareholders)
  • In last 5 years GM spent 60.7 billion USD on capital expenditures

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