Intrinsic value of General Motors - GM

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$34.64

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$34.64

 
Intrinsic value

$205.19

 
Up/down potential

+492%

 
Rating

str. buy

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of GM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 51.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.20
  10.80
  10.22
  9.70
  9.23
  8.81
  8.42
  8.08
  7.77
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
Revenue, $m
  166,380
  184,349
  203,190
  222,895
  243,464
  264,902
  287,220
  310,434
  334,567
  359,649
  385,713
  412,799
  440,952
  470,223
  500,666
  532,343
  565,317
  599,658
  635,442
  672,746
  711,654
  752,255
  794,641
  838,912
  885,170
  933,524
  984,087
  1,036,979
  1,092,326
  1,150,258
  1,210,913
Variable operating expenses, $m
 
  129,209
  142,395
  156,186
  170,582
  185,586
  201,205
  217,452
  234,343
  251,897
  270,138
  288,908
  308,612
  329,098
  350,405
  372,574
  395,652
  419,687
  444,731
  470,839
  498,070
  526,486
  556,151
  587,136
  619,510
  653,352
  688,740
  725,758
  764,494
  805,039
  847,490
Fixed operating expenses, $m
 
  42,311
  43,369
  44,453
  45,564
  46,703
  47,871
  49,068
  50,294
  51,552
  52,841
  54,162
  55,516
  56,904
  58,326
  59,784
  61,279
  62,811
  64,381
  65,991
  67,640
  69,331
  71,065
  72,841
  74,662
  76,529
  78,442
  80,403
  82,413
  84,474
  86,585
Total operating expenses, $m
  156,835
  171,520
  185,764
  200,639
  216,146
  232,289
  249,076
  266,520
  284,637
  303,449
  322,979
  343,070
  364,128
  386,002
  408,731
  432,358
  456,931
  482,498
  509,112
  536,830
  565,710
  595,817
  627,216
  659,977
  694,172
  729,881
  767,182
  806,161
  846,907
  889,513
  934,075
Operating income, $m
  9,545
  12,830
  17,426
  22,256
  27,318
  32,613
  38,143
  43,914
  49,930
  56,200
  62,734
  69,729
  76,824
  84,221
  91,935
  99,984
  108,385
  117,160
  126,329
  135,916
  145,943
  156,437
  167,425
  178,935
  190,997
  203,643
  216,905
  230,818
  245,418
  260,745
  276,837
EBITDA, $m
  19,953
  24,316
  30,068
  36,105
  42,428
  49,037
  55,936
  63,129
  70,624
  78,432
  86,563
  95,032
  103,853
  113,044
  122,624
  132,614
  143,037
  153,917
  165,280
  177,152
  189,565
  202,548
  216,134
  230,357
  245,255
  260,864
  277,226
  294,381
  312,374
  331,251
  351,061
Interest expense (income), $m
  2,323
  2,094
  2,670
  3,276
  3,911
  4,573
  5,263
  5,981
  6,728
  7,505
  8,312
  9,151
  10,022
  10,928
  11,870
  12,850
  13,870
  14,931
  16,036
  17,188
  18,388
  19,641
  20,947
  22,311
  23,736
  25,225
  26,781
  28,408
  30,111
  31,892
  33,756
Earnings before tax, $m
  11,684
  10,736
  14,756
  18,980
  23,407
  28,040
  32,881
  37,933
  43,202
  48,696
  54,422
  60,578
  66,802
  73,293
  80,065
  87,134
  94,516
  102,229
  110,293
  118,728
  127,555
  136,797
  146,478
  156,624
  167,261
  178,418
  190,124
  202,409
  215,308
  228,853
  243,081
Tax expense, $m
  2,416
  2,899
  3,984
  5,124
  6,320
  7,571
  8,878
  10,242
  11,665
  13,148
  14,694
  16,356
  18,036
  19,789
  21,617
  23,526
  25,519
  27,602
  29,779
  32,056
  34,440
  36,935
  39,549
  42,288
  45,161
  48,173
  51,333
  54,651
  58,133
  61,790
  65,632
Net income, $m
  9,427
  7,837
  10,772
  13,855
  17,087
  20,469
  24,003
  27,691
  31,537
  35,548
  39,728
  44,222
  48,765
  53,504
  58,447
  63,607
  68,997
  74,627
  80,514
  86,671
  93,115
  99,862
  106,929
  114,335
  122,101
  130,245
  138,790
  147,759
  157,175
  167,063
  177,449

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  24,801
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  221,690
  218,165
  240,461
  263,781
  288,123
  313,493
  339,905
  367,377
  395,937
  425,620
  456,465
  488,519
  521,836
  556,476
  592,504
  629,991
  669,014
  709,655
  752,002
  796,149
  842,194
  890,242
  940,404
  992,795
  1,047,539
  1,104,762
  1,164,600
  1,227,194
  1,292,693
  1,361,252
  1,433,033
Adjusted assets (=assets-cash), $m
  196,889
  218,165
  240,461
  263,781
  288,123
  313,493
  339,905
  367,377
  395,937
  425,620
  456,465
  488,519
  521,836
  556,476
  592,504
  629,991
  669,014
  709,655
  752,002
  796,149
  842,194
  890,242
  940,404
  992,795
  1,047,539
  1,104,762
  1,164,600
  1,227,194
  1,292,693
  1,361,252
  1,433,033
Revenue / Adjusted assets
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
Average production assets, $m
  55,103
  61,020
  67,256
  73,778
  80,587
  87,683
  95,070
  102,754
  110,742
  119,044
  127,671
  136,636
  145,955
  155,644
  165,720
  176,205
  187,120
  198,487
  210,331
  222,679
  235,557
  248,996
  263,026
  277,680
  292,991
  308,996
  325,733
  343,240
  361,560
  380,735
  400,812
Working capital, $m
  -8,978
  -5,346
  -5,892
  -6,464
  -7,060
  -7,682
  -8,329
  -9,003
  -9,702
  -10,430
  -11,186
  -11,971
  -12,788
  -13,636
  -14,519
  -15,438
  -16,394
  -17,390
  -18,428
  -19,510
  -20,638
  -21,815
  -23,045
  -24,328
  -25,670
  -27,072
  -28,539
  -30,072
  -31,677
  -33,357
  -35,116
Total debt, $m
  84,628
  76,288
  93,612
  111,732
  130,646
  150,358
  170,880
  192,226
  214,417
  237,480
  261,447
  286,353
  312,241
  339,156
  367,150
  396,277
  426,598
  458,176
  491,079
  525,381
  561,159
  598,492
  637,468
  678,176
  720,712
  765,174
  811,668
  860,304
  911,196
  964,466
  1,020,241
Total liabilities, $m
  177,854
  169,514
  186,838
  204,958
  223,872
  243,584
  264,106
  285,452
  307,643
  330,706
  354,673
  379,579
  405,467
  432,382
  460,376
  489,503
  519,824
  551,402
  584,305
  618,607
  654,385
  691,718
  730,694
  771,402
  813,938
  858,400
  904,894
  953,530
  1,004,422
  1,057,692
  1,113,467
Total equity, $m
  43,836
  48,651
  53,623
  58,823
  64,251
  69,909
  75,799
  81,925
  88,294
  94,913
  101,792
  108,940
  116,370
  124,094
  132,128
  140,488
  149,190
  158,253
  167,696
  177,541
  187,809
  198,524
  209,710
  221,393
  233,601
  246,362
  259,706
  273,664
  288,271
  303,559
  319,566
Total liabilities and equity, $m
  221,690
  218,165
  240,461
  263,781
  288,123
  313,493
  339,905
  367,377
  395,937
  425,619
  456,465
  488,519
  521,837
  556,476
  592,504
  629,991
  669,014
  709,655
  752,001
  796,148
  842,194
  890,242
  940,404
  992,795
  1,047,539
  1,104,762
  1,164,600
  1,227,194
  1,292,693
  1,361,251
  1,433,033
Debt-to-equity ratio
  1.931
  1.570
  1.750
  1.900
  2.030
  2.150
  2.250
  2.350
  2.430
  2.500
  2.570
  2.630
  2.680
  2.730
  2.780
  2.820
  2.860
  2.900
  2.930
  2.960
  2.990
  3.010
  3.040
  3.060
  3.090
  3.110
  3.130
  3.140
  3.160
  3.180
  3.190
Adjusted equity ratio
  0.097
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9,427
  7,837
  10,772
  13,855
  17,087
  20,469
  24,003
  27,691
  31,537
  35,548
  39,728
  44,222
  48,765
  53,504
  58,447
  63,607
  68,997
  74,627
  80,514
  86,671
  93,115
  99,862
  106,929
  114,335
  122,101
  130,245
  138,790
  147,759
  157,175
  167,063
  177,449
Depreciation, amort., depletion, $m
  10,408
  11,487
  12,642
  13,849
  15,110
  16,424
  17,792
  19,215
  20,695
  22,232
  23,830
  25,303
  27,029
  28,823
  30,689
  32,631
  34,652
  36,757
  38,950
  41,237
  43,622
  46,110
  48,709
  51,422
  54,258
  57,222
  60,321
  63,563
  66,956
  70,507
  74,224
Funds from operations, $m
  15,203
  19,324
  23,414
  27,705
  32,198
  36,894
  41,795
  46,906
  52,232
  57,780
  63,558
  69,525
  75,794
  82,326
  89,136
  96,238
  103,648
  111,384
  119,464
  127,908
  136,737
  145,972
  155,637
  165,758
  176,358
  187,467
  199,111
  211,322
  224,130
  237,569
  251,673
Change in working capital, $m
  -1,342
  -521
  -546
  -571
  -597
  -622
  -647
  -673
  -700
  -727
  -756
  -785
  -816
  -849
  -883
  -919
  -956
  -996
  -1,038
  -1,082
  -1,128
  -1,177
  -1,229
  -1,284
  -1,341
  -1,402
  -1,466
  -1,534
  -1,605
  -1,680
  -1,759
Cash from operations, $m
  16,545
  28,547
  23,960
  28,276
  32,794
  37,515
  42,442
  47,579
  52,932
  58,507
  64,313
  70,310
  76,610
  83,175
  90,019
  97,157
  104,605
  112,380
  120,502
  128,990
  137,865
  147,149
  156,867
  167,041
  177,700
  188,869
  200,577
  212,856
  225,735
  239,249
  253,432
Maintenance CAPEX, $m
  0
  -10,204
  -11,300
  -12,455
  -13,663
  -14,923
  -16,238
  -17,605
  -19,028
  -20,508
  -22,045
  -23,643
  -25,303
  -27,029
  -28,823
  -30,689
  -32,631
  -34,652
  -36,757
  -38,950
  -41,237
  -43,622
  -46,110
  -48,709
  -51,422
  -54,258
  -57,222
  -60,321
  -63,563
  -66,956
  -70,507
New CAPEX, $m
  -29,166
  -5,917
  -6,236
  -6,522
  -6,808
  -7,096
  -7,387
  -7,684
  -7,988
  -8,302
  -8,627
  -8,965
  -9,319
  -9,689
  -10,077
  -10,485
  -10,914
  -11,367
  -11,844
  -12,348
  -12,879
  -13,439
  -14,030
  -14,654
  -15,311
  -16,005
  -16,736
  -17,507
  -18,320
  -19,175
  -20,077
Cash from investing activities, $m
  -35,643
  -16,121
  -17,536
  -18,977
  -20,471
  -22,019
  -23,625
  -25,289
  -27,016
  -28,810
  -30,672
  -32,608
  -34,622
  -36,718
  -38,900
  -41,174
  -43,545
  -46,019
  -48,601
  -51,298
  -54,116
  -57,061
  -60,140
  -63,363
  -66,733
  -70,263
  -73,958
  -77,828
  -81,883
  -86,131
  -90,584
Free cash flow, $m
  -19,098
  12,426
  6,424
  9,299
  12,323
  15,496
  18,818
  22,290
  25,915
  29,697
  33,641
  37,702
  41,989
  46,458
  51,119
  55,983
  61,060
  66,361
  71,901
  77,692
  83,750
  90,089
  96,726
  103,679
  110,966
  118,606
  126,620
  135,028
  143,853
  153,118
  162,849
Issuance/(repayment) of debt, $m
  22,124
  16,461
  17,324
  18,120
  18,914
  19,713
  20,522
  21,346
  22,191
  23,063
  23,966
  24,906
  25,888
  26,915
  27,994
  29,127
  30,321
  31,578
  32,904
  34,302
  35,777
  37,334
  38,976
  40,708
  42,535
  44,463
  46,494
  48,636
  50,892
  53,270
  55,774
Issuance/(repurchase) of shares, $m
  -2,500
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  19,507
  16,461
  17,324
  18,120
  18,914
  19,713
  20,522
  21,346
  22,191
  23,063
  23,966
  24,906
  25,888
  26,915
  27,994
  29,127
  30,321
  31,578
  32,904
  34,302
  35,777
  37,334
  38,976
  40,708
  42,535
  44,463
  46,494
  48,636
  50,892
  53,270
  55,774
Total cash flow (excl. dividends), $m
  196
  28,887
  23,748
  27,418
  31,237
  35,209
  39,339
  43,636
  48,107
  52,760
  57,608
  62,609
  67,876
  73,373
  79,113
  85,110
  91,380
  97,939
  104,805
  111,994
  119,527
  127,422
  135,702
  144,387
  153,502
  163,069
  173,114
  183,663
  194,745
  206,388
  218,623
Retained Cash Flow (-), $m
  -3,965
  -4,815
  -4,972
  -5,200
  -5,428
  -5,658
  -5,890
  -6,126
  -6,369
  -6,619
  -6,878
  -7,148
  -7,430
  -7,725
  -8,034
  -8,360
  -8,702
  -9,063
  -9,443
  -9,845
  -10,268
  -10,715
  -11,186
  -11,683
  -12,208
  -12,761
  -13,344
  -13,959
  -14,606
  -15,289
  -16,007
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  24,072
  18,776
  22,218
  25,809
  29,551
  33,450
  37,510
  41,738
  46,141
  50,729
  55,460
  60,446
  65,648
  71,079
  76,751
  82,678
  88,876
  95,361
  102,149
  109,259
  116,708
  124,516
  132,704
  141,294
  150,308
  159,770
  169,705
  180,139
  191,100
  202,616
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  22,497
  16,293
  17,776
  18,898
  19,645
  20,018
  20,024
  19,685
  19,029
  18,094
  16,910
  15,561
  14,083
  12,529
  10,953
  9,404
  7,924
  6,549
  5,303
  4,205
  3,261
  2,472
  1,829
  1,319
  927
  633
  420
  271
  169
  102
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

General Motors Company designs, builds, and sells cars, trucks, crossovers, and automobile parts worldwide. The company operates through GM North America, GM Europe, GM International Operations, GM South America, and GM Financial segments. It markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Holden, Opel, Vauxhall, Baojun, Jiefang, and Wuling brand names. The company also sells cars, trucks, and crossovers to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. In addition, it offers connected safety, security and mobility solutions, and information technology services. The company, through its subsidiary, General Motors Financial Company, Inc., provides automotive financing services. General Motors Company was founded in 1897 and is based in Detroit, Michigan.

FINANCIAL RATIOS  of  General Motors (GM)

Valuation Ratios
P/E Ratio 5.5
Price to Sales 0.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 3.1
Price to Free Cash Flow -4.1
Growth Rates
Sales Growth Rate 9.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 26.6%
Cap. Spend. - 3 Yr. Gr. Rate 24.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 126.8%
Total Debt to Equity 193.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 7.8%
Return On Equity 22.5%
Return On Equity - 3 Yr. Avg. 19.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 12.8%
Gross Margin - 3 Yr. Avg. 11.2%
EBITDA Margin 14.7%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 5.7%
Oper. Margin - 3 Yr. Avg. 3.5%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 20.7%
Eff/ Tax Rate - 3 Yr. Avg. 0.5%
Payout Ratio 25.1%

GM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GM stock intrinsic value calculation we used $166380 million for the last fiscal year's total revenue generated by General Motors. The default revenue input number comes from 2016 income statement of General Motors. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GM stock valuation model: a) initial revenue growth rate of 10.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7%, whose default value for GM is calculated based on our internal credit rating of General Motors, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of General Motors.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GM stock the variable cost ratio is equal to 70.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $41279 million in the base year in the intrinsic value calculation for GM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for General Motors.

Corporate tax rate of 27% is the nominal tax rate for General Motors. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GM are equal to 33.1%.

Life of production assets of 5.4 years is the average useful life of capital assets used in General Motors operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GM is equal to -2.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $43836 million for General Motors - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1495.76 million for General Motors is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of General Motors at the current share price and the inputted number of shares is $51.8 billion.


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COMPANY NEWS

▶ [$$] Whats Keeping GM Going Strong Probably Wont Last   [Apr-30-17 08:49PM  The Wall Street Journal]
▶ Detroit Auto Makers Are Upbeat as Sales Volumes Stall   [08:48PM  The Wall Street Journal]
▶ Detroit Auto Makers Are Upbeat as Sales Volumes Stall   [03:49PM  The Wall Street Journal]
▶ Oil Majors Can No Longer Ignore The Electric Car Threat   [Apr-29-17 04:00PM  Oilprice.com]
▶ GMs Profit Jumps 34% on Strong Truck, SUV Sales   [Apr-28-17 10:50PM  The Wall Street Journal]
▶ [$$] Sales Speed Ahead But Stock Stalls Out   [07:21PM  The Wall Street Journal]
▶ Business Highlights   [05:45PM  Associated Press]
▶ [$$] Week in Review, April 29   [05:24PM  Financial Times]
▶ [$$] What's Keeping GM Going Strong Probably Won't Last   [02:21PM  The Wall Street Journal]
▶ GM profit soars 33 percent   [02:09PM  Reuters Videos]
▶ Story Stocks from Briefing.com   [12:24PM  Briefing.com]
▶ The Top General Motors Shareholders (GM)   [09:32AM  Investopedia]
▶ Why Investors Should Like GM Earnings   [08:40AM  24/7 Wall St.]
▶ Truck, SUV Sales Power GM's Profit   [08:28AM  The Wall Street Journal]
▶ GM CFO: Q1 sales strong in North America   [07:51AM  CNBC Videos]
▶ GM beats Street on top and bottom line   [07:32AM  CNBC Videos]
▶ Ford Says Steel Costs Soaring, Defends Model Vs. Tesla After Q1 Beat   [Apr-27-17 05:01PM  Investor's Business Daily]
▶ Q1 GDP Report, GM, Exxon, Chevron Lead Investing Action Plan   [04:30PM  Investor's Business Daily]
▶ Is Tesla More Valuable Than General Motors?   [03:35PM  Market Realist]
▶ GM Declares Quarterly Dividend of 38 Cents   [02:57PM  TheStreet.com]
▶ GM Earnings: What to Watch   [02:55PM  The Wall Street Journal]
▶ General Motors Is Hard to Figure Out   [02:46PM  TheStreet.com]
▶ GM Declares Dividend   [02:44PM  PR Newswire]
▶ GM Factory Seizure Threatens Oil Sector In Venezuela   [Apr-26-17 05:00PM  Oilprice.com]
▶ [$$] A Hollowed-Out Heartland   [12:29AM  The Wall Street Journal]
▶ Clarification: China-Auto Show-GM story   [12:51AM  Associated Press]
▶ GM appeal of ignition switch ruling rejected by high court   [Apr-24-17 05:24PM  Associated Press]
▶ GM Loses Bid to Limit Fallout From Ignition-Switch Cases   [04:13PM  The Wall Street Journal]
▶ GMs 1Q17 Earnings Event: What to Watch   [10:37AM  Market Realist]
Stock chart of GM Financial statements of GM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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