Stocks pairs trading: GM vs TSLA
When evaluating the investment potential using a stock pairs strategy between General Motors Co. (GM) and Tesla Inc. (TSLA), certain financial metrics guide the decision to go long on GM and go short on TSLA. Here's a detailed comparison:
Reasons to Consider Buying GM:
Valuation and Earnings Growth: GM's forward P/E of 4.70 is significantly lower than TSLA's forward P/E of 39.32, suggesting that GM is relatively undervalued. GM’s expected EPS next year is $9.08, showing strong profit potential. In contrast, TSLA’s anticipated EPS next year is only $3.64, despite its higher market valuation.
Market Performance and Financial Stability: GM has shown a positive performance over the last half year with a gain of 45.65%, and its year-to-date performance is also strong at 18.93%. This stability is coupled with a robust book-to-share value of $53.57, underscoring financial solidity.
Reasons to Consider Selling TSLA:
High Valuation with Lower Growth Prospects: TSLA’s high forward P/E ratio coupled with a relatively modest EPS growth projection for the next year (36.28%) compared to its current valuation indicates potential overvaluation.
Recent Market Performance: TSLA has experienced significant declines across various time frames: -11.45% over the past week, -17.26% over the past month, and a substantial -31.52% over the past quarter. Such volatility might be concerning for risk-averse investors.
Profitability Concerns: Despite higher gross margins, TSLA’s profitability margins like ROI (21.69%) and operating margin (9.19%) do not fully justify its high valuation, especially when compared to its current market challenges.
Decision:
Long on 3 GM: This position benefits from GM's lower valuation, strong earnings outlook, and recent positive price performance.
Short on 1 TSLA: This position is justified by TSLA’s high valuation, less favorable growth outlook, and recent negative price movements.
Reasons to Consider Buying GM:
Valuation and Earnings Growth: GM's forward P/E of 4.70 is significantly lower than TSLA's forward P/E of 39.32, suggesting that GM is relatively undervalued. GM’s expected EPS next year is $9.08, showing strong profit potential. In contrast, TSLA’s anticipated EPS next year is only $3.64, despite its higher market valuation.
Market Performance and Financial Stability: GM has shown a positive performance over the last half year with a gain of 45.65%, and its year-to-date performance is also strong at 18.93%. This stability is coupled with a robust book-to-share value of $53.57, underscoring financial solidity.
Reasons to Consider Selling TSLA:
High Valuation with Lower Growth Prospects: TSLA’s high forward P/E ratio coupled with a relatively modest EPS growth projection for the next year (36.28%) compared to its current valuation indicates potential overvaluation.
Recent Market Performance: TSLA has experienced significant declines across various time frames: -11.45% over the past week, -17.26% over the past month, and a substantial -31.52% over the past quarter. Such volatility might be concerning for risk-averse investors.
Profitability Concerns: Despite higher gross margins, TSLA’s profitability margins like ROI (21.69%) and operating margin (9.19%) do not fully justify its high valuation, especially when compared to its current market challenges.
Decision:
Long on 3 GM: This position benefits from GM's lower valuation, strong earnings outlook, and recent positive price performance.
Short on 1 TSLA: This position is justified by TSLA’s high valuation, less favorable growth outlook, and recent negative price movements.
إخلاء المسؤولية
لا يُقصد بالمعلومات والمنشورات أن تكون، أو تشكل، أي نصيحة مالية أو استثمارية أو تجارية أو أنواع أخرى من النصائح أو التوصيات المقدمة أو المعتمدة من TradingView. اقرأ المزيد في شروط الاستخدام.