Should You Stay Away from General Electric?

PHOTO CREDIT: General Electric

OVERVIEW

General Electric Company is an industrial company based in the United States with operations in countries around the world. They operate under the power and renewable energy division, aviation, capital (which includes GECAS aircraft leasing), healthcare, and many other industries. The company was founded in 1892.

Why you Should?

  1. General Electric has a promising future. After the company took massive steps to restructure the operations, General Electric is an aviation juggernaut and has also expanded into the healthcare and renewable energy division. Recently, the company had the largest airplane engine (GE9X) certified by the FAA. These opportunities will benefit the company’s long-term growth.
  2. General Electric is an industrial company as mentioned before and as a stronger global economy returns, General Electric will see demand for its products rise. As companies spend more on renewable energy solutions and start to fly more aircraft, General Electric will see a rise in revenues and profits once again.

Why You Should Not?

  1. General Electric has been negatively impacted due to the COVID-19 Pandemic as businesses save more money instead of spending it. This has hurt the demand for most of the company’s divisions like aerospace and renewable energy. This has negatively impacted the company’s financial results.
  2. General Electric has had horrible leadership which caused the company to fall in the industrial segment. This has negatively impacted investor sentiment about the company. Bad investor sentiment for long periods of time is not god because the stock is subject to volatile trading or lack of growth in price.
  3. General Electric currently has high amounts of debt. The company currently owes over 85 billion dollars. Though General Electric has drastically reduced its debt load, it will take years for the company to bring this amount to a healthy number and until this happens, the stock price will continue to fall or have little to no growth.
  4. Due to the reasons mentioned above, General Electric has seen its stock price fall. Analysts have predicted the lowest stock price for the company but have been proven wrong as the stock price continued to fall after that. It currently trades at around 6 dollars a stock, a price that it last traded in 1993. It down from its all-time high of 55 dollars in 2000. General Electric has been a market underperformer in the past.
  5. General Electric has seen falling revenues and profits over the past couple of financial years due to restructuring which involves divesting low-growth and loss-making assets and also due to the reasons mentioned before. This causes General Electric to have a weak balance sheet which will impact its future growth and make it harder for the company to loan more money. In the financial year of 2019, the company reported revenues of around 95.2 billion but a loss in profit of about 5 billion. In the financial year of 2018, the company reported more revenues at around 97 billion but reported a higher loss at 22.3 billion dollars.
PHOTO CREDIT: Yahoo Finance

MY OPINION

In my opinion, if General Electric can mount a great turnaround of its business strategy under its new CEO, then it is a great industrial company to invest in. However, a high debt load and impacts due to a weak global economy has hurt the company’s financial results and investor returns over the past couple of financial years.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Aaditya Patel

Aaditya Patel

2 Followers

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.