What is GM's Intrinsic value?

General Motors Co (GM) Intrinsic Value Analysis

Executive Summary

As of June 2, 2025, General Motors Co's estimated intrinsic value ranges from $83.51 to $474.07 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $474.07 +855.6%
Discounted Cash Flow (5Y) $296.12 +496.9%
Dividend Discount Model (Multi-Stage) $209.75 +322.8%
Dividend Discount Model (Stable) $83.51 +68.3%

Is General Motors Co (GM) undervalued or overvalued?

With the current market price at $49.61, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate General Motors Co's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.75 1.09
Cost of equity 7.3% 11.0%
Cost of debt 4.1% 7.5%
Tax rate 19.6% 21.8%
Debt/Equity ratio 2.71 2.71
After-tax WACC 4.4% 7.2%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 5.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $187,442 (FY12-2024) to $354,730 (FY12-2034)
  • Net profit margin expansion from 3% to 10%
  • Capital expenditures maintained at approximately 15% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $296 $398,247M 86.5%
10-Year Growth $474 $570,193M 75.5%
5-Year EBITDA $246 $350,193M 84.7%
10-Year EBITDA $376 $475,100M 70.6%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 10.8%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.2%
  • Long-term growth rate: 2.0%
  • Fair value: $209.75 (322.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.0% (Low) to 7.3% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $42 to $125
  • Selected fair value: $83.51 (68.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $47937M
Enterprise Value $160045M
Trailing P/E 8.25
Forward P/E 5.08
Trailing EV/EBITDA 6.65
Current Dividend Yield 131.42%
Dividend Growth Rate (5Y) -0.60%
Debt-to-Equity Ratio 2.71

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $142.22
Discounted Cash Flow (5Y) 28% $74.03
Dividend Discount Model (Multi-Stage) 22% $41.95
Dividend Discount Model (Stable) 17% $12.53
Weighted Average 100% $300.81

Investment Conclusion

Based on our comprehensive valuation analysis, General Motors Co's weighted average intrinsic value is $300.81, which is approximately 506.3% above the current market price of $49.61.

Key investment considerations:

  • Strong projected earnings growth (3% to 10% margin)
  • Consistent cash flow generation

Given these factors, we believe General Motors Co is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.