TheStreet Ratings quantitative stock model maintains a Buy recommendation on General Motors Co. (GM) . Since the stock was upgraded to Buy from Hold on April 30, 2018, the stock appreciated by 22.1% in June before reversing course and giving up all its gains.
All the stocks covered by TheStreet Ratings are evaluated daily by our quantitative model reviewing both fundamental analysis of the latest financial statements and technical analysis of share movements. The technically weak stock performance places the shares of General Motors in jeopardy of an impending downgrade.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate GENERAL MOTORS CO as a Buy with a ratings score of B. 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 strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings goes as follows:
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- GENERAL MOTORS CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, GENERAL MOTORS CO swung to a loss, reporting -$0.03 versus $6.01 in the prior year. This year, the market expects an improvement in earnings ($6.42 versus -$0.03).
- GM, with its decline in revenue, underperformed when compared the industry average of 16.7%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio is very high at 2.88 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, GM has a quick ratio of 0.68, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Automobiles industry and the overall market on the basis of return on equity, GENERAL MOTORS CO underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: GM
-- Reported by Kevin Baker in Palm Beach Gardens, FL