A Multiple Of 6x Makes General Motors A Great Buy For Long-Term Investors

From a growth perspective, General Motors' (GM) results were extremely disappointing. Revenue fell by 2.4% and profits fell by 13%. Most of the losses were propelled by declining revenues from European operations, especially the Opel unit in Germany. Bears point out that Ford (F), facing the same problems in Europe, has managed to post a rise of 17% in EPS. However, one needs to understand that GM has been restructuring its Opel unit under its Interim Vice Chairman Stephen Girsky. Therefore, the costs associated with restructuring have adversely impacted profits. The stock is only trading at a forward price to earnings multiple of 6x.

The stock is trading at a cheap multiple of 6x. The company has been actively planning to strengthen its world-wide operations. One of those plans was the restructuring that took place recently, in order to shift power from regions to the center. The biggest drag on GM's resources is the state's stake of 32%. The treasury wants to at least reach breakeven on the bail-out money injected in GM. Break-even will be achieved when the stock climbs to $53. The current management is bullish about the future of the company. Given that its massive product launch and European restructuring plan bring the intended results, the stock is expected to rise in the future. Find more