3 Reasons General Motors Stock Is a Screaming Buy

Yahoo

14 hours ago

Key Points
General Motors has sharply reduced its shares outstanding and boosted EPS.
The Detroit carmaker has invested billions into its brands and product lineup.
Moreover, management has successfully restructured its business in China.
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When thinking about General Motors (NYSE: GM), many investors think back to the financial crisis and government bailout, but that doesn't do justice to the company that GM has become in the years since. GM is doing a lot of things right, and it's quietly becoming arguably the best automotive investment out there. Here are three reasons why.
Returning value
When it comes to returning value to shareholders, there are two primary pathways: dividends and share buybacks. Each comes with its advantages, but General Motors has decided to go heavy on share buybacks, with its stock trading at a paltry eight times price-to-earnings.
General Motors has been extremely engaged in share buyback programs over the past decade. The Detroit automaker has consistently used strong free cash flow, along with the belief that its stock is heavily undervalued, to significantly reduce shares outstanding and boost earnings per share. You can see the extreme change in the graphic below.
The carmaker has spent nearly $25 billion on share repurchases over the past three-plus years, reducing the number of shares outstanding from 1.5 billion to 950 million over that span. This is a significant and serious amount of cash spent to buy back shares when you consider that GM's market cap is roughly $50 billion. As long as GM's stock remains cheap, GM buying back its shares is good for investors, and that isn't likely to change in the near-term.
Investing in brands/product
General Motors has spent billions of dollars and years of time investing in its portfolio of brands and vehicles, and it's starting to pay off. Chevrolet, the heart and soul of General Motors, and GMC have both been thriving in 2025, with a record first half for GMC and the best since 2019 for Chevrolet.
The brands, and GM in general, are coming off a product wave over the past few years that brought updated crossovers, SUVs, and EVs to the market -- and its highly profitable trucks are next.
Chevrolet is also making a splash in the EV market, becoming the No. 2 brand during the second quarter, trailing only Tesla in the U.S. market. July was the best sales month ever for the Equinox EV, and it was the best sales result for an EV other than a Tesla in the U.S. market. The Equinox is projected to place in the top three in sales for 2025, behind only Tesla's Model Y and 3.
In the broader picture, General Motors has invested heavily into its products and brands, and that's going to carry sales momentum for years to come.
A turnaround in China
China has been the promised land for automakers for decades: a booming population with a craving for vehicles. Unfortunately for foreign automakers, domestic brands have thrived in recent years -- so much so that there's a brutal price war going on, causing even the best foreign autos to struggle with profitability and market share.
General Motors had previously been extremely successful in China, driving billions to the bottom line at its peak. But this price war hit GM hard, too, and forced the company back to the drawing board for a roughly $4 billion restructuring strategy. It's paying off, and GM just turned in a second consecutive quarter of sales increases, increasing 20% during Q2.
"Our strong Q2 performance reflects the sustainable growth trajectory we are building in both sales and market share through local innovations," said Steve Hill, GM senior vice president and president of GM China. "We remain committed to driving profitable growth for China business by focusing on strong execution, business agility and customer choices."
What it all means
General Motors has been doing a lot of things right lately, even if Wall Street hasn't noticed. The company has spent tens of billions of dollars reducing its shares outstanding, poured billions in investments into brands and products, and reversed one of its biggest weaknesses in China. General Motors is buying back its shares on the cheap, and it's time mainstream investors started following suit.
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Daniel Miller has positions in General Motors. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
3 Reasons General Motors Stock Is a Screaming Buy was originally published by The Motley Fool