Friday, February 5, 2016

Watch List: General Motors

Good morning,

Since yesterday was the day for a Ford Motor Company review, today will be a day dedicated to reviewing one of their competitors and another dividend paying company, General Motors. We'll review the company, their historical data, and then how it stacks up today. After the review is complete, I'll decide whether or not it earns a spot on the watch list. 

Let's get it on:

General Motors - (GM):

General Motors is primarily an auto manufacturer based out of Michigan. Under the name of Chevrolet, GMC, Buick, and Cadillac it both sells, and provides vehicle financing for the purchase of such vehicles. In addition to this, GM also produces replacement parts for when these vehicles break down or need required maintenance. 

Historical data:

I struggle with where to start with GM so we will start with what most people already know. In 2009, GM filed for bankruptcy after what seemed like endless years of declining sales and market share. Ultimately GM had to cut a few of their brands: Pontiac, Saturn, Hummer, and Saab and start over with billions granted as a bailout by the US government which would help to restructure the company.  Using the bailout money, GM restructured, cut out large chunks of their company, and re-branded themselves as a new GM. This led to the turn around of the company which drove it to new heights. Since then, in the last five years, GM has had an average annual loss in EPS of 57.01% but a total raise in revenue of 8.31%. From 2010 until 2013, it appeared that GM continued to gain momentum as their income sheets showed growth. In 2014 however, the income seemed to level off and the cash flow dropped by a hair. GM then started issuing dividends to their shareholders in Apr 2014 but did not raise the dividend until 2015 even though they only hold a payout ratio of 31.6%. 

General Motors as it stands now:

GM seems to be managing well enough. Their P/E ratio is 10.58x and their EPS is 2.73. They have a dividend payout of 5.13% that is paid quarterly at $1.52 and their payout ratio as mentioned above is only at 31.6% which leaves room for payouts to investors. The ex-dividend date is currently pitted for March 9th to pay out $0.38/share which at this time is only 32 days away. This leaves time to put money aside for it if the purchase sounds attractive. In the very recent past (yesterday), GM posted Q4 EPS estimates that showed promise and this makes the stock sound all that more attractive. This coupled with the fact that they are priced at a bargain for their 52 week moving average of $24.62-39.00 may lead investors to start believing that the company has finally learned how to handle its money and bring in shareholders. Currently, GM trades at $28.84/share and is up as of this morning while I type this summary. 

To watch or not to watch:

Alright, now that the gritty part is over with, let's get to talking about whether or not we'll be keeping an eye on this stock or if we'll have to push it off for awhile and put it on the sell list. Overall, I think GM is now a good company as a whole. I emphasis the word now in that last sentence. Although their products are not my personal favorite line of vehicles, I know lots of people in my area of the world that swear by them and would never buy anything but GM products. This would lead me to believe that they have a loyal customer base and therefore they have a market for their products. 

On a closer level, their company appears to be fairing well as low gas/oil prices assist them with truck sales, much like with Ford, and they continue to have customer sales that bring in buyers. With their ex-divided date coming up quickly, it would appear that now would be the time to make the decision on whether to put money away and reserve it for purchase of GM. I however think that I would rather place my money on Ford rather than GM due to the fact that Ford weathered the time of crisis much better than GM did. GM has unfortunately shown in the past that they could not protect their brand without cutting off some of their family and feeding them to the wolves and for that, I place GM on the sell list until further notice brings them out of the dog house. 

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