As part of an ongoing series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, General Electric Company (GE).
Profile
General Electric Company is a global industrial powerhouse with operations spanning aviation, power, renewable energy, and healthcare. Following years of streamlining and spin-offs, GE is now largely focused on high-value segments like jet engines and energy solutions. Its aviation unit is one of the world’s leading suppliers of aircraft engines and related services, while its energy businesses are positioned to benefit from the global transition to cleaner power. The company is backed by a strong balance sheet, steady cash flow generation, and a renewed focus on operational efficiency.
DCF Analysis
Inputs
Discount Rate: 9%
Terminal Growth Rate: 3%
WACC: 9%
Forecasted Free Cash Flows (FCFs) in billions
2025: $4.0B → Present Value: $3.67B
2026: $4.6B → Present Value: $3.87B
2027: $5.3B → Present Value: $4.08B
2028: $6.0B → Present Value: $4.11B
2029: $6.8B → Present Value: $4.39B
Total Present Value of FCFs = $20.12 billion
Terminal Value Calculation
Using the perpetuity growth model:
Terminal Value = (6.8 × 1.03) / (0.09 – 0.03) = $116.74 billion
Present Value of Terminal Value = $116.74 / (1.09)^5 = $75.89 billion
Enterprise Value Calculation
Enterprise Value = $20.12B + $75.89B = $96.01 billion
Net Debt Calculation
Net Debt = Total Debt – Cash = $19.27B – $14.6B = $4.67 billion
Equity Value Calculation
Equity Value = Enterprise Value – Net Debt = $96.01B – $4.67B = $91.34 billion
Per-Share DCF Value
Shares Outstanding = 1.07 billion
Per-Share DCF Value = $91.34B / 1.07B = $85.37
Conclusion
DCF Value: $85.37
Current Price: $229.38
Margin of Safety: -62.79%
Based on the DCF valuation, General Electric appears overvalued. The estimated intrinsic value of $85.37 per share is well below the current market price of $229.38, resulting in a -62.79% Margin of Safety. While GE remains a strong industrial business, the current valuation suggests a significant premium relative to its long-term cash flow potential.
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
