General Motors (GM 0.06%) crushed it on earnings when it released third-quarter 2022 financial results on Tuesday.  

Reporting $2.25 per share in profits and $41.9 billion, GM fell short of analyst projections for quarterly sales (Wall Street had expected to see $42.2 billion). Regardless, the profit GM reported was a full 20% ahead of expectations, sparking a mini-rally in GM stock. It rose 3.6% on earnings day, and a total of 6.8% in the three trading days since earnings came out.

GM by the numbers

The bump in stock price was not surprising, because GM delivered a whole lot more than just an "earnings beat" on Tuesday. Sales for the quarter surged an astounding 56% year over year. Vehicle sales by unit grew 17% year over year to 1.5 million, with the fastest growth being in South America (sales up 86%) and the greatest absolute growth in the all-important North American market -- 663,000 vehicles sold, for 27% year-over-year growth.  

In almost every market where GM competes, the company expanded its market share. (The exception was in the Asia-Pacific, Middle East, and Africa market.) Globally, GM expanded its share to the point where 7.7% of all cars and trucks sold worldwide were GM cars.  

Granted, profit margins slipped 110 basis points -- presumably because of well-publicized inflation in the price of car parts and problems with the supply chain -- but even so, earnings grew rapidly, up 39%.  

Best of all, GM flipped the script on operating cash flow. In contrast to the $2.6 billion in cash the company was burning a year ago, in Q3 2022 GM generated positive automotive operating cash flow of $6.5 billion.

After deducting capital spending and adding patent royalties, the company's "adjusted automotive free cash flow" for the quarter flipped from negative $4.4 billion a year ago to positive $4.6 billion this year. Granted, it's not common to include "patent royalties" in a free cash flow calculation, but even backing those out, FCF for the quarter would still have been $4.5 billion, which is impressive.  

Cash is king

The good news gets even better. Looking ahead through the final fourth quarter of this year (currently underway), GM sees continued momentum in both GAAP earnings growth and free cash flow as well.

For 2022, GM projects total earnings per share under generally accepted accounting principles (GAAP) of between $5.76 and $6.76, automotive operating cash flow ranging from $16 billion to $19 billion, and free cash flow (FCF) ranging from $7 billion to $9 billion.

Valuing General Motors' stock

So how should an investor value GM stock based on these numbers?

Looking in the rearview mirror, things are a bit confusing. On the one hand, free cash flow at GM remains depressed by the pandemic and its supply chain snarls -- only $1.1 billion in FCF produced over the past 12 months, which is quite a contrast to the company's claimed $9.7 billion in trailing-12-month earnings.  

Look ahead, however, and the future seems pretty bright for GM stock. At the midpoint of predicted earnings -- $6.26 per share -- GM shares cost only 6.1 times current year earnings. For a blue chip stock that analysts believe will grow earnings at nearly 16% annually over the next five years, that's pretty darn cheap -- even before factoring in the company's modest 1% dividend yield.

GM stock also appears a pretty compelling bargain when valued on its finally reviving free cash flow. Assume the company hits close to the middle of its projected free cash flow range this year -- $8 billion -- and GM stock is trading for just under seven times FCF. Again, for a 16% grower with a 1% dividend, that price seems more than attractive.

Admittedly, with its share price down about 30% over the past 52 weeks, GM stock hasn't been a great investment in the recent past. But the way this business is performing, these low prices are not going to last. Simply put: This car stock is priced to move.