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 0.5%, juxtaposed with a three-month change of 39%. 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: 4/10
- Growth rank: 5/10
- GF Value rank: 1/10
- Momentum rank: 9/10
Based on the above method, GuruFocus assigned General Electric Co a GF Score of 65 out of 100, which signals poor future outperformance potential.
Understanding General Electric Co Business
General Electric Co, with a market cap of $183.17 billion and sales of $67.95 billion, is a global leader in air travel and in the energy transition. Formed through the combination of two companies in 1892, including one with historical ties to American inventor Thomas Edison, GE is known for its differentiated technology and massive industrial installed base of equipment worldwide. This includes aerospace engines, gas and steam turbines, and onshore and offshore wind turbines. GE earns most of its profits on the service revenue of that equipment, which is generally higher-margin. The company is led by Danaher alumnus Larry Culp, who is steering GE through a breakup of its businesses.
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 5.71% in 2019 to a low of 0.48% in 2022, before a slight recovery to 5.26% in 2023. This trend highlights the challenges General Electric Co faces in maintaining profitability.
Additionally, General Electric Co's Gross Margin has also seen a decline over the past five years, with a drop from 28.12% in 2019 to 23.18% in 2021, followed by a modest increase to 25.84% in 2023. This pattern underscores the company's struggles to convert its revenue into profits, which is a critical aspect of financial health and future growth potential.
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 strong historical legacy and a significant industrial presence, the current financial indicators suggest that investors should be cautious. The low GF Value rank, in particular, points to a valuation that may not be in line with the company's growth prospects, which could limit its ability to outperform in the future.
GuruFocus Premium members can find more 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.
