Discussion and 2 replies
Brian_1234
GeneralMotorsNYSE.pptxGeneral Motors (NYSE:GM)
Background - GM
Also known as General Motors Co.
Operates in the Automotive industry against competitors such as Ford, Honda, and soon Tesla with their upcoming electric vehicle launch.
Went bankrupt in 2009
The stock remains undervalued
Trend Analysis - GM The figure below shows how GM has a growing interest expense that will need to be paid back and a decline of income and COGS. The sales during this 4- year time period have also been on a decline for the last 2 years and had limited growth before that time.
Growth- Income Statement
Sale Growth 2016 2017 2018 2019 2020 0 -2.41 1 -6.67 -10.75 COGS growth 2016 2017 2018 2019 2020 0 -1.81 4.25 -7.29 -12.16 Gross Income 2016 2017 2018 2019 2020 0 -5.15 -14.24 -3.12 -3.02 Interest Expense Growth 2016 2017 2018 2019 2020 0 2.13 13.91 19.39 40.409999999999997
Years
Growth Rate(%)
Financial Ratio Analysis – GM GM has been able to maintain and overall increase their financial ratio throughout this 5 – year time period. They have a liquidity ratio that has raised to 1.01 due to an increase of sales in the North American dealerships of trucks and SUVs (Wayland, 2020).
| Financial Ratio Analysishjghjgh | |||||
| Period | 12/2020 | 12/2019 | 12/18 | 12/17 | 12/16 |
| Liquidity Ratios | |||||
| Current Ratios | 1.01 | 0.88 | .92 | .89 | .89 |
| Quick Ratios | .79 | .67 | .73 | .68 | .66 |
| Operating Performance Ratio | |||||
| Days of Sales Inventory | 100.79 | 88.83 | 77.05 | 75.70 | 63.72 |
| Days of Sales Outstanding | 34.61 | 29.93 | 28.11 | 35.41 | 34.65 |
| Days of Payables | 68.67 | 64.13 | 63.45 | 73.71 | 64.16 |
| Receivables Turnover | 3.62 | 4.11 | 4.74 | 4.82 | 5.73 |
| Inventory Turnover | 10.55 | 12.19 | 12.98 | 10.31 | 10.53 |
| Fixed Assets Turnover | 1.55 | 1.68 | 1.82 | 1.95 | 2.73 |
| Total Assets Turnover | .53 | .60 | .67 | .67 | .80 |
| Profitability Ratios | |||||
| Gross Profit Margin | 11.16 | 10.18 | 9.59 | 13.46 | 12.77 |
| Operating Profit Margin | 5.42 | 3.99 | 3.02 | 6.88 | 5.74 |
| Net Profit Margin | 5.10 | 4.80 | 5.38 | -2.67 | 5.67 |
| Return on Investment | |||||
| ROA | 2.70 | 2.89 | 3.60 | -1.79 | 4.53 |
| ROE | 14.39 | 16.32 | 21.43 | -9.84 | 22.52 |
Profit Ratio – GM Over the last few years we can see GM has worked to maintain and increase their profit margins from years prior. Investors want to see that a company can be profitable and stay profitable against the competition.
Profitability Ratio
Gross Profit Margin 2020 2019 2018 2017 2016 11.16 10.18 9.59 13.46 12.77 Operating Profit Margin 2020 2019 2018 2017 2016 5.42 3.99 3.02 6.88 5.74 Net Profit Margin 2020 2019 2018 2017 2016 5.0999999999999996 4.8 5.38 -2.67 5.67
ROE – GM GM shows a decrease of an estimated 7.04% in the past few years. When a company decreases its ROE one possible reason is they are not investing money back into the company. GM’s management team should consider using more debt financing for its operations rather than its equity
| 2020 | 2019 | 2018 | |
| ROE | 14.39% | 16.32% | 21.43% |
| Net Profit Margin | 5.10% | 4.80% | 5.38% |
| Asset Turnover | 0.53% | 0.60% | 0.67% |
| Financial Leverage | 5.22% | 5.46% | 5.85% |
| Debt/Equity Ratio | 1.64% | 1.60% | 1.88% |
Financial Recommendations for GM
GM looks to be financially stable for the next two to three years
Even with a global pandemic the ROE for GM was respectable at 14.39%
An investor should notice that they will be able to see a return on their investment even though GM has a debt-to-equity ratio greater than 1
GM took a big hit in 2017 on their net income causing it to become negative, GM reported that they had a net loss of $4.9 billon from a profit of $2.1 billion in 2016 (Ferris, 2018).
Companies often take a hit on their net income when a specific type of product is no longer trending. Luckily, GMs strong management team noticed a trend when it came to electric cars and decided they would invest $1 billion towards autonomous vehicles (Ferris, 2018).
The ability to eliminate products that are not selling, GM will have more money to improve their current popular models. This has shown to increase revenue over time.
Reflection - GM
Investors should know by now that their money is in the right hands when they decide to invest in GM
GM has many plans in place to become one of the more popular autonomous vehicles in the near future
Information such as a company’s ROE and debt-to-ratio, allows an investor to grasp where the company is predicted to go in the future
References
Ferris, R. (2018, February 6). General Motors beats expectations on strong crossover sales and cost control. CNBC. Retrieved April 18, 2021 from https://www.cnbc.com/2018/02/06/general-motors-q4-2017-earnings.html
Morningstar (2021) General Motors CO (GM). Morningstar. Retrieved from http://financials.morningstar.com/ratios/r.html?t=GM®ion=usa&culture=en-US
Morningstar.(2021). Growth, Profitability, and Financial Ratios for Ford Motor Co (F). Retrieved from (https://financials.morningstar.com/ratios/r.html?t=0P0000029A&culture=en&platform=sal
Morningstar.(2021). Growth, Profitability, and Financial Ratios for General Motors Co (GM). Retrieved from
https://financials.morningstar.com/ratios/r.html?t=0P0000RQZL&culture=en&platform=sal
Wayland, M (2020). General Motors shares gain after truck sales deliver big earnings beat in third quarter. CNBC. Retrieved from https://learn.umgc.edu/d2l/le/content/563045/viewContent/20789380/View
