Long/Short Investments
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Long/Short Investments in L/S Equity: Valuation and Ideas,

​General Motors (GM) Valuation (Financial/Operating Assumptions)

General Motors (GM) is a popular pick in the market and something that I am personally long. Although the stock is down 11% for the year, I am up on the investment about 4% and also enjoy the 5% annual dividend.

First I’ll provide the basic financial/operating assumptions:

  • 2016 revenue of $146B (slightly below consensus)
  • Year-over-year revenue growth of 1%, as GM and its comparables (F, HMC, etc.) are facing the same wall of competition in a low-growth market
  • EBITDA margins of 8.2% long-term. This is key and a realistic target. GM is, however, on a recent slump where EBITDA margins dip below 6% every other year. Looking into GM’s projected sales data and cost structure, this is doable.
  • Depreciation and capex stabilize at realistic targets of 5.3% and 5%, respectively
  • Cash flow from operations growth of 2% per year
  • Effective tax rate of 28% long-term

The Valuation