general motors company (GM – Free Report) is one of the most searched stocks on Zacks.com these days. So it’s worth looking at some facts that could shape the stock’s performance in the short term.
This company’s stock has returned -6.2% over the past month, compared to a -3.4% change in the Zacks S&P 500 Composite Index. The Zacks Automotive-Domestic industry, which includes General Motors Company, has gained 1.9% in this period. The key question here is where the stock is likely to go in the short term.
While media releases and rumors about significant changes in a company’s business outlook typically cause its stock to “trend” and lead to immediate price movements, there are some fundamentals that ultimately govern buy-and-hold decisions. There are always facts.
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.
Essentially, we study how the sell-side analysts covering a stock are revising their earnings estimates to reflect the impact of the latest business trends. And as a company’s earnings expectations rise, so will the fair value of its stock. If the fair value is higher than the current market price, investors will be more willing to buy the stock, causing the price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
General Motors Company is expected to post earnings of $1.88 per share for the current quarter, representing a year-over-year change of -16.4%. Over the past 30 days, the Zacks Consensus Estimate has changed by -0.1%.
The consensus earnings estimate for the current fiscal year is $7.59, indicating no change from the prior year. Over the past 30 days, this estimate has changed by -0.1%.
Next year’s consensus earnings estimate of $7.18 represents a -5.4% change from the earnings that General Motors Company was expected to report a year ago. Over the past month, the forecast has changed by -0.5%.
The Zacks Rank, a proprietary stock evaluation tool with a strong, outside-audited track record, effectively harnesses the power of earnings estimate revisions to deliver a more definitive picture about near-term stock price direction. We provide. The magnitude of the recent change in consensus estimates, along with 3 other factors related to the earnings estimate, gives General Motors Company a Zacks Rank #2 (Buy).
The chart below shows the company’s consensus EPS estimate over the next 12 months over time.
12 months EPS
Revenue growth forecast
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.
General Motors Company’s current quarter consensus revenue estimate is $43.3 billion, representing a year-over-year change of +3.4%. Estimates for the current and next fiscal year are $171.18 billion and $175.19 billion, representing changes of +9.2% and +2.3%, respectively.
Last reported results and surprising details
General Motors Company reported revenue of $44.75 billion in its last reported quarter. This represents a +25.1% year-over-year change. EPS for the same period was $1.91, compared to $1.14 in the year-ago period.
The reported earnings represent a surprise of +5.34% when compared to the Zacks Consensus Estimate of $42.48 billion. EPS surprise was +10.4%.
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. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key determinant of future stock performance.
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). etc.), 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 Company 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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