General Motors scores 29 for management and 62 for moat. The management score rests on a return on invested capital of 1.2% and a gross margin of 10.9% — figures that describe capital earning less than it costs to employ. The balance sheet carries debt at 2.13x equity, which magnifies both the returns above and the risk beneath them. The solid moat and weak management are not the same judgement, and the gap between them is where the argument about this business sits.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 8.6% a year, below the 9.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 17.2x. That produces an intrinsic value of $19.21, a 10-CAP price of $201.32 and a payback time price of $237.64, with the value zone set at the highest of the three, $237.64. Today's price of $79.31 sits inside that zone.
The price sits inside the value zone, but the business scores 62 for moat and 29 for management. Cheap and good are different tests, and only one of them is passed here.
| Price | $79.31 |
| Market cap | $71.7B |
| P/E ratio | 40.1x |
| Return on invested capital | 1.2% |
| Gross margin | 10.9% |
| Debt to equity | 2.13x |
| Free cash flow yield | 14.8% |
| Growth rate used | 8.6% |
| Growth rate measured | 9.0% |
| Exit multiple assumed | 17.2x |
| Company | Moat | Buy price |
| Royal Caribbean Group (RCL) | 71 | $169.66 |
| Hilton Worldwide (HLT) | 60 | $140.46 |
| O'Reilly Automotive (ORLY) | 55 | $36.06 |
| Carvana Co. (CVNA) | 76 | $32.37 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of General Motors rather than accepting ours.