General Motors (GM)

Automotive manufacturer General Motors (NYSE:GM) reported Q3 CY2025 results exceeding the market’s revenue expectations, but sales were flat year on year at $48.59 billion. Its non-GAAP profit of $2.80 per share was 20.5% above analysts’ consensus estimates.

Company Overview

Founded in 1908 by William C. Durant, General Motors (NYSE:GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.

Much capital investment and technical know-how are needed to manufacture functional, safe, and aesthetically pleasing automobiles for the mass market. Barriers to entry are therefore high, and auto manufacturers with economies of scale can boast strong economic moats. However, this doesn’t insulate them from new entrants, as electric vehicles (EVs) have entered the market and are upending it. This has forced established manufacturers to not only contend with emerging EV-first competitors but also decide how much they want to invest in these disruptive technologies, which will likely cannibalize their legacy offerings.

GM's competitors in the automotive industry include Ford (NYSE:F), Toyota (NYSE:TM), Volkswagen (OTC:VWAGY), and Honda (NYSE:HMC).

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, General Motors’s sales grew at a solid 10.1% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. General Motors’s recent performance shows its demand has slowed as its annualized revenue growth of 4.4% over the last two years was below its five-year trend.

This quarter, General Motors’s $48.59 billion of revenue was flat year on year but beat Wall Street’s estimates by 7.9%.

Looking ahead, sell-side analysts expect revenue to decline by 4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

General Motors has bad unit economics for an industrials business, signaling it operates in a competitive market. This is also because it’s an automobile manufacturer.

Automobile manufacturers have structurally lower profitability as they often break even on the initial sale of vehicles and instead make money on parts and servicing, which come many years later - this explains why new entrants such as Rivian, Lucid, and Nikola have negative gross margins. As you can see below, these dynamics culminated in an average 12.5% gross margin for General Motors over the last five years.

This quarter, General Motors’s gross profit margin was 13.7%, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

General Motors was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.2% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, General Motors’s operating margin decreased by 3.8 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. General Motors’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, General Motors generated an operating margin profit margin of 2.2%, down 5.3 percentage points year on year. Since General Motors’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

General Motors’s EPS grew at an astounding 27.3% compounded annual growth rate over the last five years, higher than its 10.1% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into General Motors’s earnings to better understand the drivers of its performance. A five-year view shows that General Motors has repurchased its stock, shrinking its share count by 33%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For General Motors, its two-year annual EPS growth of 8.5% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, General Motors reported adjusted EPS of $2.80, down from $2.96 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects General Motors’s full-year EPS of $10.03 to shrink by 1.6%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

General Motors has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.4% over the last five years, slightly better than the broader industrials sector.

General Motors’s free cash flow clocked in at $3.96 billion in Q3, equivalent to a 8.1% margin. The company’s cash profitability regressed as it was 1.3 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although General Motors hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14.3%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, General Motors’s ROIC decreased by 3.5 percentage points annually over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

General Motors’s $132.5 billion of debt exceeds the $29.7 billion of cash on its balance sheet. Furthermore, its 5× net-debt-to-EBITDA ratio (based on its EBITDA of $19.76 billion over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. General Motors could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope General Motors can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We were impressed by how significantly General Motors blew past analysts’ revenue expectations this quarter. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 8.1% to $62.74 immediately following the results.

Updated: December 4, 2025 at 10:27 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

General Motors isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its low gross margins indicate some combination of competitive pressures and high production costs. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its growth in unit sales was disappointing.

General Motors’s P/E ratio based on the next 12 months is 6.9x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $74.27 on the company (compared to the current share price of $75.26).