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General Motors Revs to Record High as U.S. Treasury Cashes-Out

Tickers in this article: GM

NEW YORK (TheStreet) -- General Motors  touched a record high Monday as U.S. Treasury Secretary Jacob J. Lew said the U.S. government had sold its last shares in the automaker, signaling that an important chapter in U.S. history was now closed.

Three years after filing for bankruptcy and receiving about $50 billion in loans, GM managed to return to the returning to the New York Stock Exchange and return to profitability. Lew said the government had recovered $39 billion of its original investment in the Detroit-based automaker, for a $10 billion loss.

GM shares have climbed 42% in 2013. On Monday, the stock rose 1.8% to $40.90 after peaking earlier at $41.17. 

GM 52 Week High Chart

GM 52 Week High data by YCharts

"The president's leadership in responding to the financial crisis helped stabilize the auto industry and prevent another Great Depression," Lew said in a statement. "With the final sale of GM stock, this important chapter in our nation's history is now closed."

On Friday, the Detroit-based business surged on the rumors it might ship an increased number of vehicles made in South Korea to Oceania, while shuttering several of its Holden-brand factories in Australia. A GM spokesperson declined to comment.

A potential stock-mover in the weeks ahead, the U.S. Treasury said in late November it will sell its remaining 31.1 million shares of General Motors by the end of the year. The sale of the stake, originally received in exchange for the automaker's bailout package, would completely relinquish the agency's holdings in the company.

General Motors has been climbing steadily over the past year, gaining 41.6% and surpassing the S&P 500's 26.8% increase. In comparison, rivals Toyota  and Ford  have added 31.3% and 27.9%, respectively.

TheStreet Ratings team rates General Motors Co as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate General Motors Co (GM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 12.4%. Since the same quarter one year prior, revenues slightly increased by 3.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GM's share price has jumped by 56.36%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The debt-to-equity ratio is somewhat low, currently at 0.87, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.
  • Net operating cash flow has increased to $3,860 million or 14.09% when compared to the same quarter last year. Despite an increase in cash flow, General Motors Co's cash flow growth rate is still lower than the industry average growth rate of 31.30%.
  • General Motors Co's earnings per share declined by 49.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, General Motors Co reported lower earnings of $2.93 a share vs. $4.62 a share in the prior year. This year, the market expects an improvement in earnings ($3.41 vs. $2.93).
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