General Motors trades at $87.75 and has moved in lockstep with the market. Its shares have returned 9.9% over the last six months while the S&P 500 has gained 11.7%.
Is there a buying opportunity in General Motors, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is General Motors Not Exciting?
We’re passing on General Motors for now. Here are three reasons you should be careful with GM, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, General Motors’s 5.8% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector.
2. Low Gross Margin Reveals Weak Structural Profitability
At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.
General Motors has bad unit economics for an industrials business, signaling it operates in a competitive market. This is also because it’s an automobile manufacturer.
Automobile manufacturers have structurally lower profitability as they often break even on the initial sale of vehicles and instead make money on parts and servicing, which come many years later - this explains why new entrants such as Rivian, Lucid, and Nikola have negative gross margins. As you can see below, these dynamics culminated in an average 11.6% gross margin for General Motors over the last five years.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Unfortunately, General Motors’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
General Motors isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 6.4× forward P/E (or $87.75 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We’re pretty confident there are superior stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.
Stocks We Would Buy Instead of General Motors
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Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
