Today we’re going to take a look at the well-established General Electric Company (NYSE:GE). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine General Electric’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for General Electric
Is General Electric still cheap?
According to my valuation model, the stock is currently overvalued by about 29%, trading at US$14.38 compared to my intrinsic value of $11.11. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that General Electric’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will General Electric generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted revenue growth of 0.42% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for General Electric, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in GE’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe GE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on GE for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on General Electric. You can find everything you need to know about General Electric in the latest infographic research report. If you are no longer interested in General Electric, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.