Long-established in the Industrial Products industry, General Electric Co (GE, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 0.67%, juxtaposed with a three-month change of 10.48%. Fresh insights from the GuruFocus Score Rating 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.
Understanding 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.
- 1. Financial strength rank: 6/10
- 2. Profitability rank: 5/10
- 3. Growth rank: 1/10
- 4. GF Value rank: 1/10
- 5. Momentum rank: 6/10
Based on the above method, GuruFocus assigned General Electric Co the GF Score of 57 out of 100, which signals poor future outperformance potential.
General Electric Co: A Snapshot
General Electric Co, with a market cap of $123.2 billion, was formed through the combination of two companies in 1892, including one with historical ties to American inventor Thomas Edison. Today, GE is a global leader in air travel and in the energy transition. The company is known for its differentiated technology and its massive industrial installed base of equipment sprawled throughout the world. That installed base most notably 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 former Danaher alumnus Larry Culp, who is leading a multiyear turnaround of the storied conglomerate based on lean principles.
Profitability Breakdown
General Electric Co's low Profitability rank can also raise warning signals. General Electric Co's Operating Margin has declined over the past five years ((-49.53%)), as shown by the following data: 2018: 6.97; 2019: 5.71; 2020: 0.54; 2021: 4.96; 2022: 3.52. Additionally, General Electric Co's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 28.46; 2019: 28.12; 2020: 23.69; 2021: 27.36; 2022: 27.46. This trend underscores the company's struggles to convert its revenue into profits.
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 -5.5 per year over the past three years, which underperforms worse than 83.28% of 2667 companies in the Industrial Products industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, General Electric Co predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While General Electric Co has a rich history and a significant presence in the Industrial Products industry, its declining profitability and growth ranks signal potential headwinds. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
