The recent history of General Motors Company (NYSE:GM) has been filled with controversy.
It famously declared bankruptcy in 2009, marking one of the largest bankruptcy filings in U.S. history. With support from the U.S. government, and the governments of Canada and Ontario, it reemerged from bankruptcy protection in 2010. All governments had divested their interest in General Motors by 2013.
This is one reason why shares are cheap today. Another is because investors are generally bearish towards the auto sector.
General Motors does sell at a discount to its peers. The company currently trades hands at $35.77 despite earning $6 per share in 2016. Analysts estimate earnings will increase slightly in 2017 to $6.05 per share. That puts shares at less than six times trailing and forward earnings.
Ford Motor Company (NYSE:F) trades at 10.2 times trailing earnings, while Fiat Chrysler Automobiles (NYSE:FCAU) posted negative earnings in 2016.
GM also pays an attractive dividend of $0.38 per share each quarter, good enough for a 4.3% yield.
General Motors also has a couple of interesting potential catalysts that could help shares go higher. The first is its relationship with Lyft, the ride-sharing service. GM owns just under 10% of Lyft and is currently working with it to develop self-driving cars.
The other is in the form of an activist investor. Billionaire hedge fund manager David Einhorn has called for the company to create a dual-class share structure that would effectively eliminate the dividend on the common stock.
GM’s CEO Mary Barra nixed the plan, but shares were still up 3% on the news. If Einhorn does get his way, it could pave the way for shares to go higher.
