Is General Motors (NYSE:GM) stock a boring investment in 2024? No way. If you like to collect dividends and appreciate share buybacks, General Motors definitely ought to be on your watch list. Without a doubt, I am bullish on GM stock, and it’s one of my favorite picks of the year so far.
General Motors is a Detroit-based automobile manufacturer that produces huge, gas-guzzling trucks but also makes electric vehicles (EVs). As we’ll see, General Motors has a surprising partner to help the automaker sell its clean-energy vehicles.
Plus, there’s a terrific value proposition for General Motors investors, even after today’s share-price pop. So, let’s start off with some easy math that could point to a terrific opportunity for enterprising investors.
General Motors: Premier Large-Cap Value Opportunity
Let’s face it. With the major large-cap stock-market indexes hovering near their all-time highs, it’s not easy to find bargains nowadays. Nevertheless, there’s great value to be found with General Motors stock, and I’ll use an old-school metric to support my bullish argument.
First and foremost, General Motors has an earnings report coming up in July. So, investors should look forward to that. For now, though, we can still calculate General Motors’ trailing 12-month price-to-earnings (P/E) ratio using the four most recent earnings figures.
Since General Motors earned a total of $8.05 per share in the past four quarters, and with the current share price at approximately $48, then the company’s P/E ratio would be 48/8.05 or 5.96x. That’s substantially lower than the sector median P/E ratio of 17.92x, and it suggests that GM stock isn’t overpriced at all.
General Motors Respects Its Shareholders
Now, I’m not saying that anyone should buy General Motors stock just because the company’s P/E ratio is low. There are other factors to consider, as well. For example, you might want to know if General Motors demonstrates respect for its shareholders.
I would say that the answer is definitely yes, but don’t just take my word for it. There’s a fresh update stating that General Motors’ board of directors approved share repurchases of up to $6 billion. This shows confidence in General Motors’ future growth prospects as well as respect for the stockholders. That’s because share buybacks reduce the supply of circulating shares and, therefore, potentially increase their value.
Paul Jacobson, General Motors’ executive vice president and chief financial officer (CFO), explained how the automaker can afford to repurchase so many shares. Jacobson cited General Motors’ “consistently strong revenue growth, margins and free cash flow” and also stated, “We are very focused on the profitability of our ICE business, we’re growing and improving the profitability of our EV business and deploying our capital efficiently.”
Another way for a company to show respect for its investors is by hiking its dividend payments. On that topic, General Motors increased its dividend distribution by 33% to $0.12 per share. Previously, the automaker paid $0.09 per share per quarter in dividends.
Pulling out the old calculator again, I figured that since General Motors will pay $0.12 per share per quarter and the stock price is around $48, then the forward dividend yield would be 0.25% per quarter or 1% per year. That’s right in line with the average dividend yield for the consumer cyclical sector.
General Motors Teams Up with Costco
Finally, we can’t just ignore the big news about General Motors collaborating with the famous big-box retail store chain Costco (NASDAQ:COST). This could be a game changer, as shoppers can now purchase a General Motors EV through Costco.
I specifically said “through” Costco and not “in” Costco, since shoppers won’t actually purchase a vehicle in a Costco store location. Rather, Costco will basically be a matchmaker/facilitator between the vehicle buyer and General Motors and may offer a discount.
Still, this is a big deal for General Motors and for EV adoption in general. Just think about the mass exposure that General Motors’ EV brands will get now. Besides, even if the vehicles are sold at a discount, this will still provide a revenue source for General Motors.
Is General Motors Stock a Buy, According to Analysts?
On TipRanks, GM comes in as a Moderate Buy based on 12 Buys, three Holds, and one Sell ratings assigned by analysts in the past three months. The average General Motors stock price target is $56.27, implying 16.7% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell GM stock, the most profitable analyst covering the stock (on a one-year timeframe) is Dan Levy of Barclays (NYSE:BCS), with an average return of 26.03% per rating and a 61% success rate. Click on the image below to learn more.
Conclusion: Should You Consider General Motors Stock?
The bullish argument can’t get much better than this. General Motors is very reasonably valued, even though the share price is on an uptrend. Moreover, General Motors’ management clearly respects the company’s investors, as demonstrated through dividends and buybacks.
Along with all of that, General Motors’ team-up with Costco is a brilliant strategy. So, in case you haven’t figured it out by now, I’m full-on bullish when it comes to GM stock, and I certainly would consider buying it.
