Presentation of a stock valuation project

1. S T O C K V A L U A T I O N
General Motors

2. Reasons for Stock Selection
 Ran screen: market capitalization of at least $1
billion, PEG ratio of less than 1.0, only “buy” ranked
stocks by analysts, and P/S ratio of less than 1
 New vehicle releases in 2014
 Government selling remaining shares by end of the
year

3. Valuation
Pro Forma Income Statements (in millions)
2014 2015 2016 2017
Sales $213,549 $247,717 $270,012 $305,114
Profit Margin 5.00% 4.80% 4.80% 4.80%
EBIT $10,677 $11,890 $12,961 $14,645
Interest Exp $275 $275 $275 $275
EBT $10,402 $11,615 $12,686 $14,370
Taxes $767 $854 $931 $1,049
EAT $9,635 $10,761 $11,755 $13,321
Pref Stk Div $1,479 $1,479 $1,479 $1,479
EATC $8,156 $9,282 $10,276 $11,842
Common
Shares
Outstanding: 1469
EPS(4) =
$8.06

4. Valuation Assumptions
 Sales growth:
 2014= 37%
 2015= 16%
 2016= 9%
 2017= 13%
 Profit Margin:
 2014= 5%
 2015-2017= 4.80%
 Interest Rates: Remain at average of $274 million
 Taxes: Remain at average of 7.3%
 Preferred Stock Dividends: Remain at average of $1479 million

5. Valuation
 EPS(4)= $8.40
 Current PE= 13.78
 Current Relative PE= .81
 Current Market PE= 17.01

6. Valuation
 Estimated Market PE= 17.5
 Estimated Relative PE= .85
 Estimated PE at year 4= 14.88
 Calculated price at year four= $119.93

7. Valuation
 To find PV:
 N= 4
 I/Y= 16.36%
 FV= $119.93
 PV= $65.42
 Current Price: $37.63

8. Recommendation
 Improving economic conditions
 New vehicles releasing in 2014 will boost sales
 Intrinsic value is more than current price
 Stock is undervalued and I expect it to increase in
price. Therefore, I recommend buying General
Motors stock.