General Motors Company (GM) and Stellantis N.V. (STLA) are two prominent players in the global auto manufacturing industry. GM designs, manufactures, and sells cars, trucks, crossover vehicles, and related automobile parts to dealers for consumer retail sales and fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments worldwide. It also offers vehicle protection, maintenance, satellite radio, and automotive financing services. Netherlands-based STLA designs, manufactures, and sells passenger vehicles, pickup trucks, SUVs, and light commercial vehicles worldwide. It also produces metallurgical products and production systems for the automobile industry and provides retail and dealer financing, leasing, and rental services.
A surge in oil and metal prices and deepening supply chain disruptions due to the ongoing Russia-Ukraine war led to the auto manufacturing industry losing momentum lately. However, automakers investing hugely in developing electric and autonomous vehicles over the years are well-positioned to capitalize on rising demand and favorable government policies.
Moreover, government investments to ramp up chip production and the significant funding from the Bipartisan Infrastructure Bill for the EV industry are expected to facilitate the auto industry’s growth. Investors’ optimism in this space is evident from the Global X Autonomous & Electric Vehicles ETF’s (DRIV) 8.2% returns over the past week versus the SPDR S&P 500 ETF’s (SPY) 6.2% gains. So, both GM and STLA should benefit.
Click here to checkout our Electric Vehicle Industry Report for 2022
STLA is a winner with 11.7% gains over the past week versus GM’s 8% gains. But which of these stocks is a better pick now? Let’s find out.
Latest Developments
On March 8, 2022, GM and Pacific Gas and Electric Company (PG&E) announced their collaboration to pilot the use of GM electric vehicles as on-demand power sources for homes in PG&E’s service area. PG&E and GM will test vehicles with cutting-edge bidirectional charging technology that can help safely power the essential needs of a properly equipped home. This further expands GM’s electrification strategy, and it will have more than 1 million units of EV capacity in North America to respond to growing demand by 2025.
On January 24, 2022, STLA announced a series of global, multi-year agreements with Amazon.com, Inc. (AMZN) that will deploy AMZN’s technology and software expertise across the STLA organization and help accelerate its shift to becoming a sustainable mobility tech company. The companies will create a suite of software-based products and services for STLA’s new digital cabin platform, STLA SmartCockpit, starting in 2024 and deliver an enhanced digital customer experience to customers.
Recent Financial Results
GM’s net sales and revenues for its fiscal 2021 fourth quarter ended December 31, 2021, decreased 10.5% year-over-year to $33.58 billion. The company’s adjusted net income came in at $1.99 billion, down 29.1% from the year-ago period. Its adjusted EPS decreased 30.1% year-over-year to $1.35. As of December 31, 2021, the company had $20.07 billion in cash and cash equivalents.
For its fiscal 2021 full-year ended December 31, 2021, STLA’s net revenues increased 213.5% year-over-year to €149.42 billion ($164.93 billion). The company’s operating income came in at €15.13 billion ($16.70 billion), representing a 402.5% rise from the prior-year period. Its pre-tax profit came in at €14.39 billion ($15.89 billion), up 393.6% from the prior-year period. STLA’s net profit came in at €14.21 billion ($15.68 billion), indicating a 602.3% year-over-year improvement. Its EPS increased 236.6% year-over-year to €4.51. The company had €49.63 billion ($54.78 billion) in cash and cash equivalents as of December 31, 2021.
Past and Expected Financial Performance
GM’s net income, tangible book value, and total assets have increased at CAGRs of 7.7%, 18%, and 2.5%, respectively, over the past three years.
GM’s revenue is expected to grow 23.3% year-over-year in fiscal 2022, ending December 31, 2022, and 6.7% in fiscal 2023.
STLA’s net income, tangible book value, and total assets have increased at CAGRs of 71.3%, 29.8%, and 40.5%, respectively, over the past three years.
Analysts expect STLA’s EPS to improve 7.2% year-over-year in fiscal 2022, ending December 31, 2022, and 6.7% in fiscal 2023.
Valuation
In terms of non-GAAP forward PEG, GM is currently trading at 0.39x, 333.3% higher than STLA’s 0.09x. In terms of forward EV/EBITDA, STLA’s 1.21x compares with GM’s 6.13x.
Profitability
STLA’s trailing-12-month revenue is almost 1.3 times GM’s. STLA is also more profitable, with a 14.2% levered free cash flow margin versus GM’s negative value.
Furthermore, STLA’s ROE, ROA, and ROTC of 33%, 8%, and 15.5% compare with GM’s 17.2%, 3%, and 4.2%, respectively.
POWR Ratings
While STLA has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, GM has an overall C grade, equating to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
STLA has an A grade for Value, consistent with its lower-than-industry valuation ratios. STLA’s 1.61x forward EV/EBIT is 86.9% lower than the 12.26x industry average. However, GM’s B grade for Value is in sync with its relatively lower valuation ratios. The company has an 11.24x forward EV/EBIT, 8.3% lower than the industry average of 12.26x.
STLA has a B grade for Quality, in sync with its higher-than-industry profitability ratios. STLA’s trailing-12-month EBIT margin of 10.6% is 12.6% higher than the 9.4% industry average. GM’s C grade for Quality reflects its slightly lower profit margin. GM has a 9% trailing-12-month EBIT margin, 4.4% lower than the industry average of 9.4%.
Of the 68 stocks in the Auto & Vehicle Manufacturers industry, STLA is ranked #2, while GM is ranked #35.
Beyond what we have stated above, our POWR Ratings system has also rated GM and STLA for Stability, Sentiment, Growth, and Momentum. Get all GM ratings here. Also, click here to see the additional POWR Ratings for STLA.
The Winner
Given the growing interest and rising investment in the electric vehicle industry, both GM and STLA are well-positioned to benefit. However, better financials, lower valuation, and higher profitability make STLA a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Auto & Vehicle Manufacturers industry.
GM shares were trading at $43.66 per share on Monday afternoon, down $1.16 (-2.59%). Year-to-date, GM has declined -25.53%, versus a -6.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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