Fundamental valuation of the General Motors Company : assessing the value in the midst of a pandemic

Abstract

The purpose of this thesis is to conduct an in depth fundamental valuation of The General Motors Company in order to provide an equity value and share price as of March 31st 2020. We hope to highlight the potential value to be had in an investment of GM, yet also showcase how the Covid-19 pandemic has caused havoc not only within the company, but on the industry at large. General Motors has recently unveiled its Ultium scalable battery propulsion platform to the public. This platform leverages the most advanced battery technology on the market with a scalable frame that will allow GM to use it across multiple car and truck applications with varying degrees of luxury and battery sizes. Using valuation techniques, we can explore comparable companies in the industry who have similar technology to look into how their battery platforms have drove company valuations. This will allow us to put a value on this platform even though it has yet to be put into production. Using the APV method, Dividend Discount Model, and Comparable Multiples Approach, we estimate three different values of $78.40 per share, $26.01 per share, and 86.62 per share respectively. While the Dividend discount model per share valuation differs strongly from the other two, we support this result by explaining that the DDM often understates value and is instead used as a lower boundary for our valuation. That being said, it still represents a 25% premium over the current share price as of March 31st 2020. While we will not say with certainty that GM stock is going to be at $80 in 5 years, all three of our models highlight how undervalued GM is to varying degrees. Based on these results, we conclude with a strong buy recommendation for General Motors as the company has ample growth and profit opportunities that are not properly reflected in the firms current share price.