Please ensure Javascript is enabled for purposes of website accessibility

Here's My Top Value Stock to Buy Right Now

By Will Ebiefung - Mar 2, 2021 at 8:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

General Motors is one of the cheapest ways for investors to bet on the explosive electric vehicle opportunity.

With an average price-to-earnings (P/E) multiple of 39.7, the stock market is pretty pricey at the moment. Nowhere is this more evident than the electric vehicle (EV) industry, where companies like Tesla and NIO boast multi-billion-dollar valuations despite relatively low sales and profits. 

General Motors (GM -2.12%) bucks that EV trend. This iconic American automaker is committed to an all-electric future, but its shares trade at a dirt-cheap valuation compared to its high-flying EV-only rivals. Let's dig deeper to see why GM is one of the top value stocks to buy right now.  

Self driving car

Image source: Getty Images.

Electric vehicles could turbocharge growth

Consulting firm Deloitte expects EVs to represent 32% of new car sales by 2030 (roughly 31.1 million units), which would indicate a compound annual growth rate (CAGR) of 29% over the next 10 years. General Motors is one of the manufacturers at the forefront of this transition. The company plans to phase out petroleum-powered vehicles by 2035 and invest $27 billion by 2025 to develop its next generation of electric and autonomous vehicles. 

GM's strategy is unique compared to its closest competitor, Ford. While Ford is leveraging its strong brands like Mustang and F-150 to build a niche for itself in the automotive space, General Motors is also heavily investing in EV products to serve non-automotive customers. 

In January, the company launched a subsidiary called Brightdrop, a one-stop-shop for commercial delivery and logistics solutions. The business has developed an electric pallet-mover called EP1, a commercial van called EV600, and a cloud-based software platform designed to help clients track and update their vehicles. Brightdrop will begin delivering EV600 vans to FedEx this year and expects them to become more widely available in early 2022. 

A dirt-cheap valuation 

GM and Ford are both legacy automakers making convincing pushes into electric vehicles. But GM might have a tiny lead in valuation because it trades at 10 times forward EPS while Ford trades at 11. Yet GM's stock is stunningly undervalued compared to some big names in the industry.

Tesla, the current market leader, boasts a forward P/E of 192 and a market cap of $764 billion. NIO (which isn't profitable on an annual basis yet) trades for 31 times sales, giving it a market cap of $86 billion. To put those numbers in perspective, GM reports a market cap of $76 billion and a price-to-sales (P/S) multiple of just 0.6. 

Is General Motors undervalued?

Is GM undervalued? Or are Tesla and NIO overvalued? It's hard to say. But investors may have already priced in years (if not decades) of growth into the market caps of Tesla and NIO, making GM the clear alternative for value-conscious investors looking to bet on the EV transition. When investors catch on to this fact, GM's shares may not stay this cheap for long. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$37.40 (-2.12%) $0.81
Ford Motor Company Stock Quote
Ford Motor Company
F
$13.18 (-2.40%) $0.32
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$729.86 (-5.16%) $-39.73
FedEx Corporation Stock Quote
FedEx Corporation
FDX
$211.56 (0.13%) $0.27
Nio Inc. Stock Quote
Nio Inc.
NIO
$14.78 (3.25%) $0.47

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.