Financial Analysis of General Electric Essay

1916 Words Aug 16th, 2008 8 Pages
General Electric Company (GE) is a diversified technology, media and financial services company. With products and services ranging from aircrafts engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products, it serves in more than 100 countries. This analysis will use financial ratios to see just how GE is performing as a Fortune 500 company. The first thing to analyze is GE’s capacity to pay its debts as they come due or in other words its liquidity. GE consolidated liquidity position is adequate. GE’s liquidity is supported both by the firm’s consistent earnings track record and its ability to quickly divest business or assets to fit …show more content…
Interestingly, GE modified some executive compensation agreements to include cash flow from operations as a metric on which management is evaluated. GE’s price-to-book ratio is a little less at 7.04, then the industry average which is 8.52. This might affect investor’s perceptions in the company. GE Company stock price is below the book value per share and therefore the stock is undervalued. Therefore the stock may be attractive for purchase. Next is taking a look at the recent trends that occurring at GE. GE's a great company with a nice safe dividend. But management squeezed most of the juice from GE over three decades, which has left it struggling for growth for five years now. Price fell from just over 60 to low/mid twenties after 9/11, at which time it was a great buy. Even last spring it was a buy at $34. But at $42 (a five year high) and a P/E of 18.5, price risk is at least as great on the downside as upside, given that growth for the foreseeable future won't hit double digits. And the likelihood of a spinoff or restructuring to unlock GE's considerable value seems as remote as ever. So unless someone is a very conservative or long term investor they should wait for a better entry point for GE. Another trend that is being seen is

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