Is General Motors (GM) Stock Undervalued Right Now?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is General Motors (GM). GM is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value.
Investors will also notice that GM has a PEG ratio of 1.22. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. GM's industry currently sports an average PEG of 3.37. Over the last 12 months, GM's PEG has been as high as 1.42 and as low as 0.31, with a median of 0.66.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. GM has a P/S ratio of 0.39. This compares to its industry's average P/S of 0.53.
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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This article originally published on Zacks Investment Research (zacks.com).
