I have a few pre-set stock screeners that send stocks my way that meet certain criteria. Today, guess who pops up on it? Good old General Motors.
The company is currently trading at a PE ratio of 4.09 (4.11 if we look at the trailing 12 months instead of year end). This means that every $100 invested in General Motors today is throwing off around $24.00 in earnings every year. Additionally, the current yield on the company’s dividends are around 4.76% which is a ridiculously good deal considering where treasury rates are lately (close to 0.5%).
I’ll just say it out right, for most long term investors including myself, this is a screaming buy. GM is a bluechip so naturally it’s not growing revenues much. Revenues actually declined 3% from 2014 to 2015 but due to extra ordinary cost efficiencies by CEO Mary Barra, net income actually jumped 82% year on year (170+% if you include extra ordinary items).
Balance sheet is sexy and their return on equity is close to 32%, due to efficient and intelligent use of debt.
The company is still suffering the after effects of the Ignition Switch crisis, spending about $1.6bn on it in 2015 (down from $4.2bn in 2014) but as far as I can tell the worst is over. Where I do have some worry is the direction of the auto industry going forward with Tesla, Uber and maybe even Apple snipping at the heels of traditional car makers with electric vehicles and autonomous driving.
Still, auto demand is still robust enough and GM still solid enough that they’re likely to keep throwing out serious earnings for a long time to come before they either adapt to the future or get stuck in a decline.
In the meantime, the company is a great juice to any portfolio. (Do your own homework as this doesn’t constitute investment advice.)
I rate them as a buy.