Long-established in the Industrial Products industry, General Electric Co (GE, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0%, juxtaposed with a three-month change of 1.57%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of General Electric Co.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 6/10
- Profitability rank: 5/10
- Growth rank: 1/10
- GF Value rank: 1/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned General Electric Co a GF Score of 57 out of 100, which signals poor future outperformance potential.
Understanding General Electric Co's Business
General Electric Co, with a market cap of $125.46 billion and sales of $83.81 billion, has been a formidable player in the industrial sector since its inception in 1892. The company, which has historical ties to American inventor Thomas Edison, is a global leader in air travel and the energy transition. Known for its differentiated technology, General Electric Co boasts a massive industrial installed base of equipment worldwide, including aerospace engines, gas and steam turbines, and onshore and offshore wind turbines. The company's profits are primarily derived from the service revenue of this equipment, which tends to be higher-margin. Under the leadership of Danaher alumnus Larry Culp, General Electric Co is undergoing a multiyear turnaround based on lean principles.
Profitability Breakdown
General Electric Co's low Profitability rank can also raise warning signals. The company's Operating Margin has declined over the past five years, with figures showing a decrease from 6.97% in 2018 to 3.52% in 2022. This negative trend is a concern as it indicates the company's decreasing efficiency in managing its operating expenses.
Furthermore, General Electric Co's Gross Margin has also seen a decline over the past five years, with a notable drop from 28.46% in 2018 to 27.46% in 2022. This trend underscores the company's struggles to convert its revenue into profits, which is a critical aspect of financial health and sustainability.
Growth Prospects
A lack of significant growth is another area where General Electric Co seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by an average of -5.5% per year over the past three years, which is worse than 83.68% of the companies in the Industrial Products industry. In a market that demands constant innovation and growth, stagnating revenues are a significant concern.
Moreover, General Electric Co's predictability rank is just one star out of five, adding to investor uncertainty regarding the consistency of revenue and earnings.
Next Steps
Considering General Electric Co's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a rich history and a strong industrial presence, the current financial indicators suggest that investors should proceed with caution. The challenges in improving profitability and reigniting growth are significant barriers that need to be addressed for General Electric Co to outperform in the future.
For investors seeking more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
