Say it ain’t so. Owners of vehicles made by General Motors (GM) filed a class-action lawsuit accusing the company of cheating in emission testing. The accusation comes at a time when the stock is moving in a bearish downtrend. GM’s stock peaked at above $38 and is headed towards the $30 - $32 range.
Investors need to ask what rigorous testing the law firm representing the plaintiff group did before filing the suit. The EPA and European regulators already cleared GM of any wrongdoing. Europe cleared Opel recently.
GM’s Stock is Inexpensive
At a P/E of just 5.1 times, GM is a very inexpensive stock. The company’s debt is more than manageable, with its debt / equity ratio of just two times. Investors also get rewarded a dividend yielding 4.58 percent. By comparison, Ford (F), who just fired its CEO but rewarded him with a package of at least $40 million, pays its investors a hefty 5.5 percent dividend.
If and when GM successfully defends itself against the accusations, the stock will recover, narrowing the discount reflected currently in its share price. On May 25, GM said that both the Duramax Diesel Chevrolet Silverado and GMC Sierra are in compliance with regulations established by the U.S. EPA and CARB emissions.
