GM - Valens Credit Report - 2021 11 04
Cash bond markets are slightly overstating GM's credit risk with a YTW of 2.419% relative to an Intrinsic YTW of 1.779%, while CDS markets are accurately stating risk with a CDS of 94bps relative to an Intrinsic CDS of 60bps. Moreover, Moody's is accurately stating the firm's fundamental credit risk, with its Baa3 credit rating one notch lower than Valens' IG4 (Baa2) credit ratingIncentives Dictate Behavior™ analysis highlights positive signals for credit holders. Management's compensation metrics should focus them on all three value drivers: asset efficiency, margins, and top-line growth, leading to Uniform ROA expansion and increased cash flows available to service debt obligations. Moreover, management members have low change-in-control compensation relative to their average annual compensation, indicating they are unlikely to seek a sale or pursue a buyout firm, reducing event risk for creditor
Valens' qualitative analysis of the firm's Q2 2021 (8/4) earnings call highlights that management is confident they are raising 2021 adjusted EBIT guidance to $11.5 billion-$13.5 billion and they exceeded expectations by driving a strong price mix in North America. In addition, they are confident they have put tools in place to help dealers maintain supply of customer-desired vehicles. Furthermore, management is confident they are focused on investing in zero-emission solutions and their ability to temporarily build cars without modules is helping them navigate short-run supply pressures
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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- 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
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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