Examining the Upside Potential of General Motors (GM) and Polaris Industries (PII) Shares

The US auto sales are expected to remain strong, with increased demand and the adoption of electric vehicles expected to drive sales even higher. Against this backdrop, sound auto stocks General Motors Company (GM) and Polaris Inc. (PII) might be ideal additions to your watchlists.

Before delving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the auto industry.

In January, the number of new vehicles sold in the United States was 1,082,620 units, up 2.2% year-over-year. This increase in the sales of new vehicles reflects a favorable trend in the automotive industry, reflecting increased customer confidence and demand.

The auto industry's expansion is being driven by rising demand for electric vehicles (EVs), environmental awareness, and government incentives that contribute to the industry's sustainability. The global EV market is expected to grow at a significant CAGR of 17.3% until 2032.

In addition, according to Business Research Insights, the global automotive market will increase at a CAGR of 3% to $3.58 trillion by 2031.

Let’s delve deeper into the fundamentals of the stocks mentioned above.

General Motors Company (GM)

GM designs, builds, and sells trucks, crossovers, cars, and automobile parts; and provides software-enabled services and subscriptions worldwide. The company operates through GM North America, GM International, Cruise, and GM Financial segments. It markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Baojun, and Wuling brand names.

GM’s trailing-12-month CAPEX / Sales of 6.38% is 105.5% higher than the 3.11% industry average. Its trailing-12-month ROCE of 15.17% is 30.3% higher than the industry average of 11.64%.

GM’s revenue for the fiscal fourth quarter that ended December 31, 2023, came in at $42.98 billion. Its net income rose 5.2% over the prior-year quarter to $2.10 billion. Its adjusted EPS came in at $1.24 for the same period.

Analysts expect GM’s EPS and revenue for the year ending December 31, 2024, to increase 14.4% and 2% year-over-year to $8.79 and $175.29 billion, respectively. It surpassed the consensus EPS estimate in each of the trailing four quarters.

Shares of GM has gained 36.3% over the past three months to close the last trading session at $38.72. Wall Street analysts expect the stock to reach $48.12 in the upcoming 12 months, indicating a potential upside of 24.3%.

GM’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

GM also has a B grade for Value. It is ranked #31 out of 53 stocks in the Auto & Vehicle Manufacturers industry. Click here for the additional POWR Ratings for Growth, Stability, Sentiment, Quality and Momentum for GM.

Polaris Inc. (PII)

PII designs, engineers, manufactures, and markets powersports vehicles worldwide. It operates through three segments: Off-Road, On-Road, and Marine. The company offers off-road vehicles (ORVs); military and commercial ORVs; snowmobiles; motorcycles; moto-roadsters, quadricycles, and boats; and aftermarket parts and apparel.

PII’s 5.58% trailing 12-month net income margin is 19.5% higher than the industry average of 4.67%. Its 39.95% trailing-12-month ROCE is 243.1% higher than the industry average of 11.64%.

For the fourth quarter ended December 31, 2023, PII’s adjusted net income from continuing operations attributable to amounted to $113.40 million. Also, its adjusted EPS from continuing operations attributable to PII came in at $1.98.

Also, its off-road segment’s sales rose 3% year-over-year to $1.92 billion. Moreover, its net cash provided by operating activities for year ended December 31, 2023, increased 82% year-over-year to $925.80 million.

The stock has gained marginally over the past month to close the last trading session at $90.19. Wall Street analysts expect the stock to reach $98.20 in the upcoming 12 months, indicating a potential upside of 8.9%.

PII's has an overall C rating, equating to a Neutral in our POWR Ratings system.

It also has an A grade for Value. It is ranked #29 in the same industry. Beyond what is stated above, we’ve also rated PII for Stability, Momentum, Quality, Sentiment and Growth. Get all PII ratings here.

What To Do Next?

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GM shares were trading at $38.47 per share on Thursday morning, down $0.25 (-0.65%). Year-to-date, GM has gained 7.10%, versus a 4.71% rise in the benchmark S&P 500 index during the same period.

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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