Will GM Stock be Helped by Planned India Expansion?

NEW YORK (TheStreet) -- General Motors Co.  (GM) believes that India is an emerging market that will overtake Japan as the world's third largest car market in 10 years. As a result, the company plans to grab a 5% market share in the country which is expected to see sales of 8 million vehicles annually by 2025. 

GM has had a presence in India for the past 18 years, though it is losing money there, according to Reuters. Rising labor costs in South Korea, which produces about a fifth of the company's output of vehicles, could also contribute to the auto company moving the hub of its Asian operations to India.

The company hopes to sell at least 400,000 vehicles in India by 2025, a 600% increase from the 57,600 vehicles the company sold in the country last year. GM already has plans to launch two new models models in the country over the next 12 months, the Trailblazer SUV and the multi-purpose van, Spin.

GM shares are up 0.34% to $35.54 in early market trading today.

TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL MOTORS CO (GM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, impressive record of earnings per share growth, notable return on equity and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 343.7% when compared to the same quarter one year prior, rising from $213.00 million to $945.00 million.
  • GENERAL MOTORS CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GENERAL MOTORS CO reported lower earnings of $1.64 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($4.48 versus $1.64).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Automobiles industry and the overall market on the basis of return on equity, GENERAL MOTORS CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.3%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Even though the current debt-to-equity ratio is 1.33, it is still below the industry average, suggesting that this level of debt is acceptable within the Automobiles industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.79 is weak.
  • You can view the full analysis from the report here: GM Ratings Report
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