On July 25, 2023, the stock price of General Electric Co (GE, Financial) increased by 6.31%, reaching $117.21 per share. With a market cap of $127.6 billion, the company's GF Value stands at $66.37, indicating a significant overvaluation. This financial snapshot, coupled with an Earnings Per Share (EPS) of $7.28 and sales of $74 billion, paints a detailed picture of the company's current financial standing.
Formed in 1892, General Electric Co has historic ties to the renowned inventor, Thomas Edison. Today, the company is leading the world in air travel and energy transition, boasting a vast installed base of aerospace engines, gas and steam turbines, and onshore and offshore wind turbines. Under the leadership of Larry Culp, a former Danaher alumnus, General Electric Co is undergoing a multiyear turnaround based on lean principles.
GF Value of General Electric Co (GE, Financial)
According to GuruFocus Value calculation, the stock of General Electric Co (GE) appears to be significantly overvalued. The GF Value is an estimation of the fair value at which the stock should ideally be traded. It is determined by historical trading multiples, past business growth, and analyst estimates of future business performance. If a stock's price significantly surpasses its GF Value Line, it is deemed overvalued and likely to yield poor future returns.
Given that General Electric Co (GE, Financial) is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
Financial Strength of General Electric Co (GE, Financial)
Investing in companies with weak financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to scrutinize a company's financial strength before deciding to buy its stock. General Electric Co has a cash-to-debt ratio of 1.11, ranking lower than 51.73% of companies in the Industrial Products industry. GuruFocus ranks the overall financial strength of General Electric Co at 6 out of 10, indicating fair financial strength.
Profitability of General Electric Co (GE, Financial)
Investing in profitable companies, especially those demonstrating consistent long-term profitability, poses less risk. General Electric Co has been profitable for 5 out of the past 10 years. Over the past twelve months, the company had a revenue of $74 billion and an Earnings Per Share (EPS) of $7.28. Its operating margin of 4.6% ranks lower than 61.13% of companies in the Industrial Products industry. GuruFocus ranks the profitability of General Electric Co at 5 out of 10, indicating fair profitability.
Growth of General Electric Co (GE, Financial)
One of the most important factors in a company's valuation is its growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of General Electric Co is -5.5%, ranking lower than 83.03% of companies in the Industrial Products industry. The 3-year average EBITDA growth is 0.6%, which ranks lower than 66.68% of companies in the Industrial Products industry.
ROIC vs WACC of General Electric Co (GE, Financial)
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The ideal scenario is for the ROIC to be higher than the WACC. For the past 12 months, General Electric Co’s ROIC is 2.23, and its WACC is 10.32.
Conclusion
In summary, the stock of General Electric Co (GE, Financial) appears to be significantly overvalued. The company's financial condition is fair, and its profitability is fair, but its growth ranks lower than 66.68% of companies in the Industrial Products industry. To learn more about General Electric Co stock, you can check out its 30-Year Financials here.
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