By Spencer Jakab 

Five years ago, these were real clunkers.

But a close brush with a bailout for America's No. 2 auto maker, Ford Motor Co., and a taxpayer rescue of output leader General Motors Co., sparked a renaissance for them. The two have slashed capacity and abandoned many of the habits that drove them to the brink in 2009.

Even with annualized sales hitting an eight-year high in June, North American auto capacity utilization is around 100%, while workforces, as represented by union membership, are 40% lower than a decade ago. Pricing discipline is stronger too. Both companies are slated to report second-quarter results Thursday and there is little sign of that rigor slipping.

Although analysts expect earnings to decline for 2014 compared with last year, the turnaround in their financial fortunes is stunning. Ford lost $30 billion between 2006 and 2008 while, between 2010 and the end of 2014, it will have earned $45 billion, based on analyst forecasts. GM's legal predecessor lost $72 billion during those dark days and will have earned about $26 billion since 2010.

But since GM's late 2010 initial public offering, both stocks have risen by less than 10% while the S&P 500 is up by two-thirds. Ford and GM trade at seemingly modest forward price/earnings multiples of 10.8 and 9.8--about 66% and 60%, respectively, of the S&P's multiple.

It seems that there is a disconnect between the industry's convincing rebound and what investors are willing to pay for it. But the stocks' cheapness reflects the highly cyclical and capital-intensive nature of the auto business.

For example, 20 years ago the price/earnings ratios of Detroit's "Big Three" (Chrysler was still a public company) all were below 40% that of the broader stock market. That is a fairly representative year as the U.S. in the mid-1990s was well into an economic recovery but the technology bubble had not yet begun to distort the broader market's valuation multiple.

Today's improving credit and labor conditions at home and rebounds in emerging markets and Europe all are cause for optimism. Just don't expect that to translate into outsize share-price gains for auto makers.

It may seem like they are priced to move, but investors with long memories know that doesn't guarantee a smooth ride.

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