GE Aerospace has been treading water for the past six months, recording a small loss of 1.1% while holding steady at $308.37. The stock also fell short of the S&P 500’s 13.5% gain during that period.
Given the weaker price action, is now a good time to buy GE? Or should investors expect a bumpy road ahead? Find out in our full research report, it’s free.
Why Are We Positive on GE?
One of the original 12 companies on the Dow Jones Industrial Average, General Electric (NYSE:GE) is a multinational conglomerate providing technologies for various sectors including aviation, power, renewable energy, and healthcare.
1. Skyrocketing Revenue Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, GE Aerospace grew its sales at an incredible 18.1% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
GE Aerospace’s EPS grew at 32.2% compounded annual growth rate over the last five years, higher than its 18.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
GE Aerospace has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 18.7% over the last five years.
Final Judgment
These are just a few reasons why we think GE Aerospace is one of the best industrials companies out there. With its shares lagging the market recently, the stock trades at 36.5× forward P/E (or $308.37 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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