General Motors Stock Has a Low Valuation. Can it Sustain Earnings Growth?

General Motors Company (NYSE:GM) has a solid business involving trucks and SUVs in North America, along with financing activities and prospects in software-enabled services. Although its currently low forward valuation might attract investors, the main issue is whether or not the company will be able to maintain its earnings in the face of industry changes, tariffs, and the expensive shift to electric vehicles. Although GM ranks among the best EV companies, another EV stock on our list has delivered returns of more than 50% over the past year. Check here to see which company it is.

The company runs its operations through its automotive divisions and via GM Financial, which offers vehicle financing and leasing; the Chevrolet, GMC, Cadillac, and Buick brands target various customer segments, while OnStar and Super Cruise provide opportunities for generating ongoing revenue from software and connected services. This combination of established brands, financing operations, and growing software capabilities helps make GM one of the best blue-chip stocks to consider.

In the second quarter of 2026, GM achieved revenue of $48.0 billion, which was an increase of 1.9% compared to the $47.1 billion recorded the previous year. Adjusted earnings before interest and taxes increased by 29.8% to $3.9 billion. The company has also raised its full-year adjusted EBIT guidance to the range of $14 billion to $16 billion, something that reflects the stronger profitability in its core business.

In 2023, the annual revenue was $171.8 billion, rose by 9.1% to $187.4 billion in 2024, and then decreased by 1.3% to $185.0 billion in 2025. This indicates that GM widened its revenue base over a period of two years before growth ceased.

GM Stock Looks Cheap on Forward Earnings

General Motors Company’s share price is about 5.6 times its forward earnings, which means its forward earnings yield is around 17.9%. To put it simply, investors are paying $5.60 for each dollar of earnings that they expect GM to earn over the following 12 months. Although the implied earnings yield looks appealing, it is not a guaranteed return since it relies on GM meeting its earnings forecasts, which in turn can be affected by vehicle demand, production costs, and economic conditions. The low forward P/E places GM among extreme value stocks, though one media company on our list ranks even higher.

The difference between GM’s forward and trailing P/E ratios is especially great. According to the latest data retrieved from Yahoo Finance, the forward P/E is 5.59 times and the trailing P/E is 37.40 times. The fact that there is a gap doesn’t mean that the stock is undervalued; GM’s earnings have been considerably affected by various special charges, such as those connected with its EV strategy and its restructuring.

Moreover, the company’s 2026 guidance involves adjustments that distinguish the expected adjusted earnings from the reported net income. In the case that analysts anticipate a recovery of earnings, the forward P/E will be considerably lower than the trailing P/E; but if those forecasts turn out to be too optimistic, the apparent discount might be misleading.

Also read: 10 Best Battery Stocks to Buy According to Billionaires

GM’s Low Multiple Reflects More Than Just Opportunity

The forward P/E ratio of GM has stayed fairly stable even though its trailing multiple has increased sharply. The forward P/E was 5.37x in June 2025, 6.23x in September 2025, 6.86x in December 2025, 5.94x in March 2026, and 6.15x in June 2026. The most recent figure is 5.59x. The figure indicates that investors have consistently given GM a moderate price multiple based on its expected earnings. The market might be taking into account the cyclical character of vehicle manufacturing, the costs associated with tariffs, and the uncertainty about the profitability of electric vehicles.

Although GM appears cheap when looking at its projected earnings, the valuation rests on the assumption that those earnings will be sustainable. The investment case could be supported by strong demand for trucks and SUVs, improved operating margins, and smaller losses on electric vehicles. On the other hand, weaker consumer demand, higher costs, or additional restructuring charges could weaken it. For investors, the key issue is not merely the low forward P/E but whether GM will be able to produce the profits necessary to justify that ratio.

Conclusion

General Motors Company seems to be fairly valued at about 5.6 times its forward earnings, which works out to an earnings yield of around 17.9%. Although its operational profitability is strong and its established business in trucks and SUVs supports the case for investment, the discount also takes into account cyclical risks, tariffs, and the uncertainty about the profitability of electric vehicles. In the end, the attractiveness of GM will depend on whether it is able to maintain earnings growth and meet its forecasts.

While we acknowledge the risk and potential of GM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GM and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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This article is originally published at Insider Monkey.