Tickers in this Article: GM, F, HMC, TTM
Auto giant General Motors (NYSE:GM) is performing splendidly operationally, but investors continue to price it as it will soon go out of business. Its recent quarter demonstrated many pockets of strength in its core markets and more recently a very successful investor established a position in the stock.

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Recent Developments
GM recently reported first quarter results that saw sales rise of 4.3% to $37.8 billion. North American operations grew 9.3% and accounted for the majority of sales at $24.2 billion, or 64% of the total top line. International operations, which included China and India, jumped 16.4%. This was the next largest category at $6.1 billion, or just over 16% of total sales. GM also announced it would be reacquiring a 1% stake in its joint venture with SAIC Motor in China to again give it an even split and greater say in continuing to build out its capabilities in what now counts as the largest automotive market.

European operations continued to struggle and reported a 19.8% decline to $5.5 billion. South American operations, including Brazil, reported a slight sales increase to $3.9 billion. Again, North America was the largest contributor to profits, followed by international. Europe continued to operate in the red, with a small profit from South America. Total reported operating income increased only slightly to $996 million but included a hefty goodwill impairment charge of $617 million, though last year's quarter also included a charge of $395 million.

Reported net income declined by nearly a third to $1 billion, or 64 cents per diluted share, but would have been $3.2 billion, or $1.77 per diluted share when backing out one-time items.

SEE: Understanding The Income Statement

Outlook and Valuation
Analysts currently project modest full-year sales growth of 3.2% and total sales of around $155 billion. The average profit projection stands at $3.49 per share and is projected to jump 32% to $4.60 per share by the end of 2013. Given these projections, the forward P/E are currently 6.4 and 4.9, respectively.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
GM continues to perform admirably in the United States and some of the fastest-growing auto markets in other parts of the world. Its cash on hand easily covers its long-term debt and most of the underfunded pensions and other employee benefits on its books. But for some reason, investors are giving GM little credit for its potential going forward.

SEE: Earning Forecasts: A Primer

The automotive market remains intensely competitive. Ford (NYSE:F), Chrysler, Honda (NYSE:HMC), Toyota (NYSE:TM) and Tata Motors (NYSE:TTM) are key rivals in nearly every part of the world. Ironically, GM's recapitalization at the height of the credit crisis gave it a new lease on life that made it competitive and free of most of its legacy obligations. The fact that Warren Buffett's Berkshire Hathaway (NYSE:BRK.A, BRK.B) recently established a position should give investors plenty of faith that GM is undervalued.

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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