(GM) (GM) Financials Here is the Mar. 3 Value Line report on GM: next one is due Jun. 2)

What is intriguing about GM is the in-place capital plant that could generate incredible profits in the right environment or the hands of the right management team.

Tobin's Q valuation ratio, for example, is at 0.03. That means that the GM stock valuation (about $12 billion) is just about 3 pct of what it would cost to replace the existing assets. If the Tobin's Q ratio is less than 1.0, there is an implication that the stock is undervalued.

But that's based on a going concern, which in the case of GM is debatable. We all know GM is in financial trouble.

The best predictor of insolvency or even bankruptcy is an financial measurement called the Altman's Financial Structure Z-Score Ratio. If the Z-Score is equal to or better than 3.0, then the Company is likely to be financially sound. Below 1.81, it's in trouble or headed that way. GM's financial trouble is confirmed by its present Z-Score of 1.08.

Altman's Z-Score and Tobin's Q-Ratio can be found at the ADVFN Financials service for all U.S. listed industrial companies. I refer to them often.

Other than questioning some of management's decisions, I avoid discussions about General Motors at this point by stating that GM stock is just a speculation. As you know, I try to focus readers on the best quality companies.

But, like the Reuters writer points out, a failure by GM could cause catastrophic damage to the global capital market. So, we are all involved one way or another.

Btw, could the possibility of GM bankruptcy be another driver for higher precious metals prices?

p.s., Mover Mike weighed in with some calculations on the Altman's Z-Score. Thanks Mike, but one point I have to warn readers about -- in my article I referred to ADVFN's data for industrial companies for a reason -- the Altman's Z-Score doesn't apply to banks, and GE is about 25-pct financial services revenue (and ~33-pct by profitabilty), so the Z-Score is going to be out of whack.

But isn't the Web great, where you can at the touch of a keystroke find all this terrific information. When Mike and I were brokers, we used to do calculations by hand and then charge clients for our "mathematical" expertise. Actually, it was just an excuse to charge big fees. I love what I see today.