General Electric GE – a Dow 30 Component That Will Be – Coming Lower in the Weeks Ahead !
This Article was also Posted in SeekingAlpha.com under my name.
General Electric (GE) suffered a serious loss of prestige as a result of its near death experience during the most recent financial meltdowns in 1999 and 2008. Heroic efforts by both the U.S. Government and Warren Buffett were required to ensure survival of a company that at the time enjoyed the coveted triple A rating. GE has since repaid its benefactors, and has been making fine progress in restoring its reputation and stature.
At a recent price of $19., and sporting a dividend yield of 3.51%, patient investors are not likely to be rewarded with share price appreciation in the coming weeks or months.
In late 2007 the company was selling for $36. and fell to $5. in early 2009. With the Bull Market that ensued, GE has only been able to grow to a recent $21 and it is my opinion that this price growth is simple – pathetic for a supposed world class company.
A one year chart is available by clicking on the following URL: http://stockcharts.com/public/1616666/tenpp
Fundamental - Valuation:
Using actual current and future earnings for 2011 - 2014, and estimating 2012 at $1.57, five year average EPS works out to $1.37. I often read that applying a multiple of X to that metric, yields a target price of $ X emerges. That is just plain Poor Valuation analysis.
Stock : General Electric Company / Symbol : GE / Approx. Current Price : $19 / My Target Price % ( Above (+) / Below (-) Current Price ) -- ( 3 – 6 month Projections from the next - - Bullish Inflection Point ) : + 3% - 20+% / PEG : 1.25 / P/E : 15.4 / Forward P/E : 10.8 / Valuation Divergence (%) -- (one - Year Projected to a Mean) from the next - - Bullish / Bearish Inflection Point : - 21% or more . . .
Comments: Obviously, this is a – “Not a Very Good Valuation and Target Price Projection.” When you do further Fundamental studies it looks even worse. Earning Growing is going to fall to half the 20+% reached recently by 2013. Add to that work, the Technical and Consensus Analysis and you have a conformation that GE is and remains a longer-term loser! This is why it is wise to compare and update - frequently. My work / analytics is for your possible taking positions at a future date. However, investing at this time, or even holding, definitely is not wise.
There is none to be excited about for until 2015 and that is unacceptable.
Technical Analysis is clearly negative.
Public Image / Consensus:
I reported many months ago that Fortune listed GE as #12 on a list of the 50 most admired US companies. Now it is #15, can you remember that the company has been #1 in electronics (as classified by Fortune) for many years in a row? As always Consensus Analysis is published as Very Good. I personally, have never believed that data was anything but paid for information and thus very inaccurate!
Although the company cut its dividend during the financial crisis, many investors look past that and see long term potential. The dividend was increased twice during 2011.
As a general rule, I find that situations where EPS is a relatively low percentage of Cash Flow are more profitable investments.
Business Model and Current Tactics
I believe GE is suitable for long term investors, who intend on living for an additional 100 years.
Instablog and past Articles that I have written for SeekingAlpha.com frequently focused on General Electric. I am a Strong Bear that has focused my recent Articles in Instablog on companies that I believe should not to be currently held in your portfolio. I have not included GE but will do so in the near future.
Have Fun Investing Wisely,
Steven H. Bauer, Ph.D.