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In comparison to its peers, General Electric’s free-cash-flow yield is low.
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Industrial behemoth
General Electric is a company that produces electricity.
has attempted an incredible turnaround, but with so many changes, it’s tough to predict what earnings will look like in the future. The stock is a Buy, according to Citigroup analyst Andrew Kaplowitz, since things are going well. There is a lot to think about. GE has a new CEO, Larry Culp, who was hired in 2018. It has restructured loans, divested enterprises, and paid off billions of dollars in debt.
Kaplowitz spoke with GE executives recently and wrote to his clients on Thursday that everything appear to be on track for 2021. His price target for GE (ticker: GE) is $17, while the stock was trading at $13.46 on Thursday afternoon. In 2021, GE forecasts sales in its industrial sectors, which include aviation and power generation, to rise at a low single-digit rate. Management expects earnings per share to be about 20 cents, with free cash flow from its industrial operations ranging between $2.5 billion and $4.5 billion. All of this would be an upgrade over 2020, but GE stock is still trading at over 68 times estimated earnings for 2021, indicating that investors are already crediting the conglomerate for many future gains. The market capitalisation of GE is over $118 billion, implying a free-cash-flow yield of less than 3%. In comparison to the average industrial conglomerate, the stock appears to be overvalued, trading at over 26 times expected 2021 earnings. The average free cash flow yield hovers around 4%. However, Kaplowitz believes that GE will create around $7 billion in free cash flow per year in the future. The analyst added, “Our sense is that operational improvements and turnaround initiatives continue to gain traction, fueling increased confidence in continuing [free cash flow] upside beyond ’21.” The stock would appear to be cheaper if the cash flow was higher. The money would also allow the corporation to pay a greater dividend and pursue acquisitions in the future. With a yearly free cash flow of $7 billion. Based on its peers’ values, GE stock could trade around $20. GE stock isn’t worth $20 today because cash flow won’t be that high for years, but the facts show how Kaplowitz arrived at his $17 goal. His viewpoint is similar to that of his contemporaries. By 2023, Wall Street expects $7 billion in free cash flow. Other Wall Street analysts are more cautious than Kaplowitz, possibly waiting for more evidence of progress before investing heavily in GE stock. Investors have had a terrible time with GE stock, which has lost over 57 percent in the last five years. The average analyst price objective for GE stock is $14.30, which is up around 6% from current levels. GE stock, on the whole, is popular on Wall Street these days. Overall, 62% of analysts tracking the stock rate the stock as a Buy. When Culp took over in late 2018, only approximately 25% of shares were rated Buy, despite the fact that the typical Buy rating ratio for companies in the sector was over 75%.
S&P 500 Index
is approximately 55%. So far, the optimism has paid off. GE stock has increased by roughly 25% year to date, outperforming the S&P 500 index. and
The Dow Jones Industrial Average is a stock market index that measures how well a/n
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