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Valens Research

GM - Embedded Expectations Analysis - 2021 01 25

General Motors Company (GM:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 19.4x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain stable, but management is confident about EBIT growth, Factory ZERO investments, and their vehicle intelligence platform

Specifically, management is confident EBIT expectations for 2021 are similar to 2020 in a non-pandemic environment, that they can leverage their vehicle intelligence platform following the introduction of new vehicles, and that they are working with dealer partners to improve customer experience. In addition, they are confident their pickup trucks and cost actions drove Q3 EBIT growth, they are focused on growth opportunities, and that they invested $2 billion in Factory ZERO. Moreover, management is confident they are maximizing their new full-size truck and SUV vehicle portfolios and are adding new higher-spec trims to full-size pick-ups
Underlying
General Motors Company

General Motors designs, builds and sells trucks, crossovers, cars and automobile parts. The company also provides automotive financing services through its subsidiary, General Motors Financial Company, Inc. (GM Financial). GM Financial provides retail loan and lease lending across the credit spectrum. GM Financial provides commercial lending products to dealers including new and used vehicle inventory floorplan financing and dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial lending products include financing for parts and accessories, dealer fleets and storage centers.

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Valens Research
Valens Research

In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:

  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
  • Stock analyst recommendations are not grounded in disciplined financial analysis
  • Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
  • Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available

We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.

  • Corporate credit ratings remain years behind the fundamental underpinnings of company performance
  • Stock analysts continue to make recommendations with deeply inherent biases
  • Research firms have failed to break down the walls between credit, equity, and macroeconomic research
  • The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming

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