general motors company (GM – (Free Report) recently appeared on the list of most searched stocks on Zacks.com. Therefore, you may need to consider some important factors that may influence the stock's performance in the near future.
Over the past month, the company's stock has increased +12%. This compares to a +2.6% change in the Zacks S&P 500 Composite Index. During this period, the Zacks Automotive Domestic industry, which includes General Motors, declined 5.3%. The key question here is: What is the future direction of the stock price?
While media reports and rumors about significant changes in a company's business prospects typically trigger stock price trends and lead to immediate price movements, there are always certain fundamental factors that ultimately drive the buy-and-hold decision. Exists.
Regarding revisions to performance forecasts
Zacks prioritizes evaluating changes in a company's future earnings expectations above all else. That's because we believe that the present value of future income streams determines the fair value of a stock.
Our analysis is fundamentally based on how the sell-side analysts covering a given stock are revising their earnings estimates to account for the latest business trends. As a company's earnings expectations rise, so does the fair value of its stock. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, which causes the stock price to rise. For this reason, empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
General Motors is expected to post earnings of $2.02 per share for the current quarter, representing a year-over-year change of -8.6%. Over the past 30 days, the Zacks Consensus Estimate has changed by +1.6%.
The consensus earnings estimate for the current fiscal year is $9, representing a +17.2% year-over-year change. This estimate has not changed over the past 30 days.
Next year's consensus earnings estimate of $9.13 represents a +1.4% change from the earnings that General Motors was expected to report a year ago. Over the past month, the forecast has changed by -1.4%.
The Zacks Rank, a proprietary stock evaluation tool with an impressive, outside-audited track record of impressive results, harnesses the power of earnings estimate revisions to be a more conclusive indicator of a stock's short-term price performance. . The magnitude of recent changes to consensus estimates and three other factors related to earnings expectations have given General Motors a Zacks Rank of #2 (Buy).
The chart below shows the company's consensus EPS estimate over the next 12 months over time.
12 months EPS
Expected revenue growth rate
Earnings growth is arguably the best indicator of a company's financial health, but nothing will happen if a company can't grow its revenue. After all, it's nearly impossible for a company to increase profits over a long period of time without increasing revenue. Therefore, it's important to know a company's earnings growth potential.
For General Motors, the consensus revenue estimate for the current quarter is $40.61 billion, representing a year-over-year change of +1.6%. The current and next fiscal year estimates of $174.98 billion and $175.94 billion represent changes of +1.8% and +0.6%, respectively.
Last reported results and surprising details
General Motors reported revenue of $42.98 billion in its last reported quarter. This corresponds to a change of -0.3% year over year. EPS for the same period was $1.24, compared to $2.12 in the year-ago period.
The reported earnings represent a surprise of +5.4% when compared to the Zacks Consensus Estimate of $40.78 billion. EPS surprise was +10.71%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company has surpassed consensus revenue estimates every time during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. To predict a stock's future price performance, it is important to determine whether the current price accurately reflects the intrinsic value of the underlying business and the company's growth prospects.
The present value of a company's valuation multiples such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), as well as the company's past value, are Comparing a company to its peers based on these parameters will help you see how reasonable its stock price is. You can get to know better.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation metrics and rates stocks from A to F, where A is better than B. , B is better than C, A is better than B, and B is better than C). ), can be very helpful in identifying whether a stock is overvalued, properly valued, or temporarily undervalued.
General Motors is rated 'A' on this score, indicating that it trades at a discount compared to its industry peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and many others on Zacks.com, may help you decide whether the market buzz regarding General Motors is worth paying attention to. However, the company's Zacks Rank #2 suggests it has the potential to outperform the broader market in the near term.
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