This CFO just called his own company's stock a bargain -- here's why he's right

General Motors (NYSE: GM) reported its second-quarter earnings, and the results beat expectations on both the top and bottom lines. In an interview on CNBC, CFO Paul Jacobson called the company's stock a "bargain," even though the share price has risen by more than 40% over the past year.

Is he right? There are certainly some good reasons to believe GM is extremely cheap right now, but there are also a few not-so-positive things to keep in mind. Here's a rundown of GM's second-quarter results, the case for why the stock is an incredible bargain, and the important things to watch going forward.

An extremely solid quarter

In the second quarter, GM generated $48 billion in revenue, about a billion dollars more than analysts had expected, and adjusted earnings per share (EPS) beat by a wide margin. Automotive free cash flow of about $5 billion was 78% higher than a year ago. One particularly impressive statistic Jacobson pointed out in the conference call was that "Our first-half earnings per share is 25% higher than the first half at any time in our history."

Plus, the automaker increased its full-year guidance for adjusted EPS, automotive free cash flow, and several other profitability metrics. Adjusted EBIT margin expanded by 2.5 percentage points year-over-year, and GM's margins have notably expanded at the same time its peer group has seen margins fall. The company has a dominant lead in the high-margin full-size pickup market, and the software and services side of the business, which includes products like OnStar and Super Cruise, continues to grow impressively. In addition, GM's insurance business has rapidly scaled from being in just three states in 2024 to 21 states now. And last but certainly not least, GM's defense business has excellent momentum, and management is hopeful this segment will turn profitable this year.

Thanks to its strong cash flow, GM continues to buy back stock at an aggressive pace. In the second quarter alone, the company spent $2 billion to repurchase about 25 million shares. The outstanding share count has declined by 8% over the past year and 35% over the past three years, which could continue to drive EPS higher going forward.

It's not all good news

GM certainly reported a strong quarter, but it wasn't a perfect one. While it beat expectations on adjusted EPS, this excludes a $2.3 billion one-time charge related to scaling back the company's EV strategy. On a GAAP basis, GM's net income actually declined by about 31% year-over-year.

Market share is arguably the biggest concern. A year ago, GM had 17.4% of the U.S. market, which has since declined to 16.6%. To be fair, there were some good reasons, such as the strategic decision to discontinue certain models and the reduction in EV incentives that had disproportionately helped GM. But this is worth keeping an eye on.

Finally, although it came in above expectations, GM's revenue grew by less than 2% year-over-year. It's important for investors to understand that this quarter was about earnings quality, not overall business growth.

Is GM a bargain at a sub-$80 stock price?

In full disclosure, General Motors is one of the largest stock investments in my portfolio, and it's a company I truly believe in as a long-term holding. Over the past decade or so, the company has done a great job of innovation, becoming more efficient, and of allocating capital in shareholder-friendly ways. Having said that, the stock isn't without risk, and it's important to realize this is a cyclical business and not all the numbers look perfect.

Even so, GM trades for a ridiculously cheap valuation of just 6.3 times forward earnings, and there's a lot to like about the company's current trajectory. I'm planning to continue to build my position at these levels, and I'm excited to see what comes next.

Matt Frankel, CFP® has positions in General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.