Intrinsic value of General Motors - GM

Previous Close

$35.75

  Intrinsic Value

$195.49

stock screener

  Rating & Target

str. buy

+447%

  Value-price divergence*

+290%

Previous close

$35.75

 
Intrinsic value

$195.49

 
Up/down potential

+447%

 
Rating

str. buy

 
Value-price divergence*

+290%

*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 52.9

 

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
  10.60
  10.04
  9.54
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
Revenue, $m
  166,380
  184,016
  202,492
  221,801
  241,946
  262,933
  284,774
  307,488
  331,098
  355,634
  381,132
  407,630
  435,175
  463,817
  493,610
  524,614
  556,893
  590,517
  625,558
  662,094
  700,207
  739,984
  781,518
  824,904
  870,243
  917,643
  967,214
  1,019,074
  1,073,346
  1,130,159
  1,189,648
Variable operating expenses, $m
 
  128,976
  141,906
  155,420
  169,519
  184,207
  199,494
  215,390
  231,915
  249,087
  266,932
  285,291
  304,569
  324,615
  345,466
  367,165
  389,757
  413,289
  437,814
  463,384
  490,059
  517,898
  546,967
  577,331
  609,063
  642,237
  676,931
  713,227
  751,211
  790,973
  832,608
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
  171,287
  185,275
  199,873
  215,083
  230,910
  247,365
  264,458
  282,209
  300,639
  319,773
  339,453
  360,085
  381,519
  403,792
  426,949
  451,036
  476,100
  502,195
  529,375
  557,699
  587,229
  618,032
  650,172
  683,725
  718,766
  755,373
  793,630
  833,624
  875,447
  919,193
Operating income, $m
  9,545
  12,730
  17,217
  21,928
  26,862
  32,022
  37,409
  43,029
  48,889
  54,995
  61,359
  68,178
  75,090
  82,298
  89,817
  97,664
  105,857
  114,417
  123,363
  132,719
  142,508
  152,755
  163,487
  174,731
  186,517
  198,876
  211,841
  225,444
  239,722
  254,713
  270,455
EBITDA, $m
  19,953
  19,007
  24,106
  29,456
  35,058
  40,912
  47,022
  53,394
  60,035
  66,954
  74,161
  81,670
  89,495
  97,651
  106,156
  115,029
  124,291
  133,963
  144,069
  154,634
  165,684
  177,248
  189,355
  202,035
  215,322
  229,250
  243,855
  259,175
  275,250
  292,121
  309,832
Interest expense (income), $m
  2,323
  2,168
  2,746
  3,350
  3,980
  4,638
  5,323
  6,037
  6,778
  7,549
  8,351
  9,183
  10,048
  10,948
  11,883
  12,856
  13,869
  14,923
  16,021
  17,165
  18,358
  19,603
  20,902
  22,258
  23,675
  25,155
  26,703
  28,322
  30,015
  31,788
  33,643
Earnings before tax, $m
  11,684
  10,561
  14,471
  18,578
  22,882
  27,384
  32,086
  36,993
  42,111
  47,446
  53,008
  58,994
  65,042
  71,350
  77,934
  84,808
  91,989
  99,494
  107,342
  115,554
  124,149
  133,152
  142,585
  152,473
  162,843
  173,721
  185,137
  197,122
  209,707
  222,925
  236,812
Tax expense, $m
  2,416
  2,852
  3,907
  5,016
  6,178
  7,394
  8,663
  9,988
  11,370
  12,810
  14,312
  15,928
  17,561
  19,265
  21,042
  22,898
  24,837
  26,863
  28,982
  31,199
  33,520
  35,951
  38,498
  41,168
  43,968
  46,905
  49,987
  53,223
  56,621
  60,190
  63,939
Net income, $m
  9,427
  7,710
  10,563
  13,562
  16,704
  19,990
  23,423
  27,005
  30,741
  34,636
  38,696
  43,066
  47,481
  52,086
  56,892
  61,910
  67,152
  72,631
  78,360
  84,354
  90,629
  97,201
  104,087
  111,305
  118,875
  126,816
  135,150
  143,899
  153,086
  162,735
  172,873

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
  220,115
  242,215
  265,312
  289,409
  314,513
  340,639
  367,808
  396,050
  425,400
  455,899
  487,596
  520,545
  554,805
  590,442
  627,529
  666,140
  706,360
  748,275
  791,978
  837,568
  885,149
  934,830
  986,727
  1,040,961
  1,097,659
  1,156,954
  1,218,988
  1,283,907
  1,351,865
  1,423,024
Adjusted assets (=assets-cash), $m
  196,889
  220,115
  242,215
  265,312
  289,409
  314,513
  340,639
  367,808
  396,050
  425,400
  455,899
  487,596
  520,545
  554,805
  590,442
  627,529
  666,140
  706,360
  748,275
  791,978
  837,568
  885,149
  934,830
  986,727
  1,040,961
  1,097,659
  1,156,954
  1,218,988
  1,283,907
  1,351,865
  1,423,024
Revenue / Adjusted assets
  0.845
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
Average production assets, $m
  55,103
  60,909
  67,025
  73,416
  80,084
  87,031
  94,260
  101,778
  109,593
  117,715
  126,155
  134,926
  144,043
  153,523
  163,385
  173,647
  184,332
  195,461
  207,060
  219,153
  231,768
  244,935
  258,682
  273,043
  288,050
  303,740
  320,148
  337,314
  355,278
  374,083
  393,774
Working capital, $m
  -8,978
  -5,336
  -5,872
  -6,432
  -7,016
  -7,625
  -8,258
  -8,917
  -9,602
  -10,313
  -11,053
  -11,821
  -12,620
  -13,451
  -14,315
  -15,214
  -16,150
  -17,125
  -18,141
  -19,201
  -20,306
  -21,460
  -22,664
  -23,922
  -25,237
  -26,612
  -28,049
  -29,553
  -31,127
  -32,775
  -34,500
Total debt, $m
  84,628
  78,464
  95,701
  113,718
  132,513
  152,094
  172,472
  193,664
  215,693
  238,586
  262,375
  287,099
  312,799
  339,522
  367,319
  396,246
  426,364
  457,735
  490,428
  524,517
  560,077
  597,190
  635,941
  676,421
  718,723
  762,948
  809,198
  857,585
  908,221
  961,229
  1,016,733
Total liabilities, $m
  177,854
  171,690
  188,927
  206,944
  225,739
  245,320
  265,698
  286,890
  308,919
  331,812
  355,601
  380,325
  406,025
  432,748
  460,545
  489,472
  519,590
  550,961
  583,654
  617,743
  653,303
  690,416
  729,167
  769,647
  811,949
  856,174
  902,424
  950,811
  1,001,447
  1,054,455
  1,109,959
Total equity, $m
  43,836
  48,425
  53,287
  58,369
  63,670
  69,193
  74,940
  80,918
  87,131
  93,588
  100,298
  107,271
  114,520
  122,057
  129,897
  138,056
  146,551
  155,399
  164,620
  174,235
  184,265
  194,733
  205,663
  217,080
  229,011
  241,485
  254,530
  268,177
  282,460
  297,410
  313,065
Total liabilities and equity, $m
  221,690
  220,115
  242,214
  265,313
  289,409
  314,513
  340,638
  367,808
  396,050
  425,400
  455,899
  487,596
  520,545
  554,805
  590,442
  627,528
  666,141
  706,360
  748,274
  791,978
  837,568
  885,149
  934,830
  986,727
  1,040,960
  1,097,659
  1,156,954
  1,218,988
  1,283,907
  1,351,865
  1,423,024
Debt-to-equity ratio
  1.931
  1.620
  1.800
  1.950
  2.080
  2.200
  2.300
  2.390
  2.480
  2.550
  2.620
  2.680
  2.730
  2.780
  2.830
  2.870
  2.910
  2.950
  2.980
  3.010
  3.040
  3.070
  3.090
  3.120
  3.140
  3.160
  3.180
  3.200
  3.220
  3.230
  3.250
Adjusted equity ratio
  0.097
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9,427
  7,710
  10,563
  13,562
  16,704
  19,990
  23,423
  27,005
  30,741
  34,636
  38,696
  43,066
  47,481
  52,086
  56,892
  61,910
  67,152
  72,631
  78,360
  84,354
  90,629
  97,201
  104,087
  111,305
  118,875
  126,816
  135,150
  143,899
  153,086
  162,735
  172,873
Depreciation, amort., depletion, $m
  10,408
  6,278
  6,889
  7,528
  8,195
  8,890
  9,613
  10,365
  11,146
  11,958
  12,802
  13,493
  14,404
  15,352
  16,338
  17,365
  18,433
  19,546
  20,706
  21,915
  23,177
  24,493
  25,868
  27,304
  28,805
  30,374
  32,015
  33,731
  35,528
  37,408
  39,377
Funds from operations, $m
  15,203
  13,988
  17,453
  21,091
  24,899
  28,880
  33,036
  37,369
  41,887
  46,594
  51,498
  56,558
  61,885
  67,438
  73,230
  79,275
  85,585
  92,177
  99,066
  106,269
  113,806
  121,694
  129,955
  138,610
  147,680
  157,190
  167,165
  177,630
  188,614
  200,144
  212,250
Change in working capital, $m
  -1,342
  -511
  -536
  -560
  -584
  -609
  -633
  -659
  -685
  -712
  -739
  -768
  -799
  -831
  -864
  -899
  -936
  -975
  -1,016
  -1,060
  -1,105
  -1,154
  -1,204
  -1,258
  -1,315
  -1,375
  -1,438
  -1,504
  -1,574
  -1,648
  -1,725
Cash from operations, $m
  16,545
  14,499
  17,989
  21,651
  25,483
  29,489
  33,669
  38,028
  42,572
  47,305
  52,238
  57,327
  62,684
  68,269
  74,094
  80,174
  86,521
  93,152
  100,082
  107,329
  114,911
  122,848
  131,160
  139,868
  148,995
  158,565
  168,603
  179,134
  190,188
  201,791
  213,975
Maintenance CAPEX, $m
  0
  -5,510
  -6,091
  -6,702
  -7,342
  -8,008
  -8,703
  -9,426
  -10,178
  -10,959
  -11,771
  -12,615
  -13,493
  -14,404
  -15,352
  -16,338
  -17,365
  -18,433
  -19,546
  -20,706
  -21,915
  -23,177
  -24,493
  -25,868
  -27,304
  -28,805
  -30,374
  -32,015
  -33,731
  -35,528
  -37,408
New CAPEX, $m
  -29,166
  -5,806
  -6,115
  -6,391
  -6,668
  -6,947
  -7,229
  -7,518
  -7,815
  -8,122
  -8,440
  -8,771
  -9,117
  -9,480
  -9,861
  -10,262
  -10,684
  -11,129
  -11,599
  -12,093
  -12,615
  -13,166
  -13,748
  -14,361
  -15,007
  -15,689
  -16,408
  -17,166
  -17,964
  -18,805
  -19,691
Cash from investing activities, $m
  -35,643
  -11,316
  -12,206
  -13,093
  -14,010
  -14,955
  -15,932
  -16,944
  -17,993
  -19,081
  -20,211
  -21,386
  -22,610
  -23,884
  -25,213
  -26,600
  -28,049
  -29,562
  -31,145
  -32,799
  -34,530
  -36,343
  -38,241
  -40,229
  -42,311
  -44,494
  -46,782
  -49,181
  -51,695
  -54,333
  -57,099
Free cash flow, $m
  -19,098
  3,182
  5,782
  8,557
  11,474
  14,534
  17,737
  21,084
  24,579
  28,225
  32,027
  35,940
  40,074
  44,384
  48,881
  53,573
  58,472
  63,589
  68,937
  74,530
  80,380
  86,505
  92,919
  99,639
  106,683
  114,071
  121,821
  129,954
  138,492
  147,458
  156,876
Issuance/(repayment) of debt, $m
  22,124
  16,515
  17,238
  18,016
  18,795
  19,581
  20,378
  21,192
  22,029
  22,893
  23,789
  24,724
  25,700
  26,723
  27,797
  28,927
  30,117
  31,371
  32,694
  34,089
  35,560
  37,113
  38,751
  40,480
  42,302
  44,224
  46,251
  48,386
  50,637
  53,007
  55,504
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
  16,515
  17,238
  18,016
  18,795
  19,581
  20,378
  21,192
  22,029
  22,893
  23,789
  24,724
  25,700
  26,723
  27,797
  28,927
  30,117
  31,371
  32,694
  34,089
  35,560
  37,113
  38,751
  40,480
  42,302
  44,224
  46,251
  48,386
  50,637
  53,007
  55,504
Total cash flow (excl. dividends), $m
  196
  19,697
  23,020
  26,573
  30,269
  34,115
  38,115
  42,276
  46,607
  51,117
  55,816
  60,664
  65,774
  71,107
  76,678
  82,500
  88,589
  94,960
  101,631
  108,618
  115,941
  123,618
  131,670
  140,118
  148,986
  158,295
  168,071
  178,340
  189,129
  200,466
  212,380
Retained Cash Flow (-), $m
  -3,965
  -4,589
  -4,862
  -5,081
  -5,301
  -5,523
  -5,748
  -5,977
  -6,213
  -6,457
  -6,710
  -6,973
  -7,249
  -7,537
  -7,840
  -8,159
  -8,495
  -8,848
  -9,221
  -9,615
  -10,030
  -10,468
  -10,930
  -11,417
  -11,931
  -12,474
  -13,045
  -13,647
  -14,282
  -14,951
  -15,655
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
 
  15,108
  18,158
  21,491
  24,968
  28,592
  32,367
  36,299
  40,394
  44,660
  49,106
  53,691
  58,525
  63,570
  68,838
  74,341
  80,095
  86,112
  92,410
  99,003
  105,911
  113,150
  120,740
  128,701
  137,054
  145,822
  155,026
  164,693
  174,847
  185,515
  196,725
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
 
  14,120
  15,757
  17,195
  18,282
  19,007
  19,370
  19,378
  19,051
  18,418
  17,515
  16,371
  15,066
  13,637
  12,134
  10,609
  9,110
  7,678
  6,346
  5,140
  4,076
  3,162
  2,397
  1,773
  1,279
  899
  614
  408
  263
  164
  99
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 5.7
Price to Sales 0.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 3.2
Price to Free Cash Flow -4.2
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 10.6% 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 10 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 1480.63 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 $52.9 billion.

RELATED COMPANIES Price Int.Val. Rating
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TM Toyota Motor A 112.39 171.57  str.buy
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COMPANY NEWS

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▶ [$$] GM's Barra in Tight Spot Among Executives on Trump's Advisory Panels   [Aug-15-17 07:51PM  The Wall Street Journal]
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▶ Tesla's Model 3: Why 3 Big Questions Remain   [Aug-14-17 09:03PM  Motley Fool]
▶ What Could Hurt Fords 3Q17 Profitability?   [07:36AM  Market Realist]
▶ [$$] China Car Sales Accelerated in July   [12:20AM  The Wall Street Journal]
▶ Automotive Giants Are Betting Big On Ride Sharing Tech   [Aug-12-17 05:00PM  Oilprice.com]
▶ Hagertys 10 Future Classics to Buy Right Now   [03:10AM  The Cheat Sheet]
▶ GM's Maven will provide cars to students at USC   [03:20PM  Associated Press]
▶ [$$] China Car Sales Accelerated in July   [05:57AM  The Wall Street Journal]
▶ Don't Panic About the Big July Auto Sales Declines   [Aug-09-17 09:45PM  Motley Fool]
▶ 5 Best Platinum Stocks to Buy Right Now   [02:19PM  Motley Fool]
▶ Why GM Stock Began August 2017 on a Weak Note   [12:05PM  Market Realist]
▶ Analyzing Consumer Sector Updates Last Week   [09:31AM  Market Realist]
▶ GMs Self-Driving Unit Launches Ride-Hailing App   [12:47AM  The Wall Street Journal]
▶ 5 Top Stocks for August   [Aug-08-17 06:05PM  Motley Fool]
▶ GM's Self-Driving Unit Launches Ride-Hailing App   [04:52PM  The Wall Street Journal]
▶ A New Bull Sees Tesla At $444 A Share   [11:27AM  Barrons.com]
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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