The Casual Investor
Investing tips for those who are not yet rich
Stock Pick 12/26/2007: GM

Today I'm reviewing a stock that is not good, General Motors (GM).  We'll take a look at the bad points and the good points, and make an analysis.


First of all, the bad stuff.  They have negative earnings and cash flow, significantly negative.  Compared with the current price per share, both earnings and cash flow are considerably larger in the negative direction than the current share price.  The profit margin is negative, as are the percentages in management effectiveness.  However, the returns on assets and investments are within a percent of zero.


One thing that's good about this company is that the price to sales ratio is only 0.08.  GM is selling a lot, even though their earnings are negative, and these sales are why the company is still breathing.  General Motors is a big auto manufacturer, well known to everyone and weighing in at $15.02B market cap.  They also have a 3.8% annual dividend.


So what can make GM turn around and become a good investment?  Well, if they get their cash flow back to positive and their car sales remain as strong as they typically have in the past, they could pull back up.  Certainly GM is traded an awful lot, with an average daily volume of 137,764 shares.  This means there will be a quick reaction to any significant news, and the price will be affected accordingly.  Keep an eye out for signs of potential good news.  If you can beat the newspapers, you can beat the buying rush and make good money when GM starts its rising period.


2007-12-26 21:51:26 GMT


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