Intrinsic value of General Electric - GE

Previous Close

$23.83

  Intrinsic Value

$23.56

stock screener

  Rating & Target

hold

-1%

Previous close

$23.83

 
Intrinsic value

$23.56

 
Up/down potential

-1%

 
Rating

hold

We calculate the intrinsic value of GE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 206.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.37
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.15
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
Revenue, $m
  123,692
  130,371
  137,359
  144,672
  152,328
  160,344
  168,740
  177,536
  186,752
  196,411
  206,536
  217,151
  228,281
  239,953
  252,195
  265,035
  278,505
  292,637
  307,464
  323,022
  339,347
  356,480
  374,460
  393,330
  413,136
  433,925
  455,746
  478,651
  502,695
  527,935
  554,431
Variable operating expenses, $m
 
  111,087
  116,664
  122,500
  128,610
  135,007
  141,707
  148,727
  156,082
  163,790
  171,871
  173,298
  182,181
  191,495
  201,265
  211,512
  222,262
  233,540
  245,373
  257,789
  270,817
  284,490
  298,839
  313,899
  329,705
  346,295
  363,709
  381,989
  401,177
  421,320
  442,465
Fixed operating expenses, $m
 
  8,110
  8,313
  8,520
  8,733
  8,952
  9,175
  9,405
  9,640
  9,881
  10,128
  10,381
  10,641
  10,907
  11,179
  11,459
  11,745
  12,039
  12,340
  12,649
  12,965
  13,289
  13,621
  13,962
  14,311
  14,668
  15,035
  15,411
  15,796
  16,191
  16,596
Total operating expenses, $m
  113,427
  119,197
  124,977
  131,020
  137,343
  143,959
  150,882
  158,132
  165,722
  173,671
  181,999
  183,679
  192,822
  202,402
  212,444
  222,971
  234,007
  245,579
  257,713
  270,438
  283,782
  297,779
  312,460
  327,861
  344,016
  360,963
  378,744
  397,400
  416,973
  437,511
  459,061
Operating income, $m
  10,265
  11,174
  12,383
  13,652
  14,985
  16,385
  17,857
  19,404
  21,030
  22,740
  24,537
  33,472
  35,460
  37,551
  39,750
  42,064
  44,498
  47,058
  49,751
  52,585
  55,565
  58,701
  62,000
  65,470
  69,121
  72,961
  77,001
  81,251
  85,721
  90,423
  95,369
EBITDA, $m
  15,262
  20,878
  22,229
  23,647
  25,136
  26,700
  28,343
  30,069
  31,884
  33,790
  35,794
  37,901
  40,117
  42,446
  44,895
  47,471
  50,179
  53,028
  56,023
  59,174
  62,488
  65,973
  69,639
  73,494
  77,549
  81,813
  86,298
  91,015
  95,976
  101,193
  106,680
Interest expense (income), $m
  5,779
  3,692
  4,187
  4,699
  5,234
  5,795
  6,382
  6,997
  7,641
  8,316
  9,023
  9,765
  10,542
  11,357
  12,212
  13,108
  14,049
  15,035
  16,070
  17,156
  18,295
  19,491
  20,745
  22,062
  23,444
  24,894
  26,417
  28,015
  29,692
  31,453
  33,301
Earnings before tax, $m
  9,030
  7,482
  8,196
  8,953
  9,750
  10,590
  11,475
  12,407
  13,389
  14,424
  15,514
  23,707
  24,918
  26,194
  27,538
  28,956
  30,449
  32,023
  33,681
  35,429
  37,270
  39,210
  41,254
  43,408
  45,677
  48,067
  50,584
  53,236
  56,029
  58,971
  62,068
Tax expense, $m
  -464
  2,020
  2,213
  2,417
  2,633
  2,859
  3,098
  3,350
  3,615
  3,894
  4,189
  6,401
  6,728
  7,072
  7,435
  7,818
  8,221
  8,646
  9,094
  9,566
  10,063
  10,587
  11,139
  11,720
  12,333
  12,978
  13,658
  14,374
  15,128
  15,922
  16,758
Net income, $m
  8,831
  5,462
  5,983
  6,536
  7,118
  7,731
  8,377
  9,057
  9,774
  10,529
  11,325
  17,306
  18,190
  19,121
  20,103
  21,138
  22,228
  23,377
  24,587
  25,863
  27,207
  28,624
  30,116
  31,688
  33,344
  35,089
  36,927
  38,862
  40,901
  43,049
  45,310

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  48,129
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  365,183
  334,286
  352,203
  370,955
  390,584
  411,138
  432,666
  455,219
  478,851
  503,618
  529,580
  556,797
  585,336
  615,264
  646,653
  679,577
  714,116
  750,351
  788,369
  828,261
  870,121
  914,051
  960,153
  1,008,539
  1,059,323
  1,112,628
  1,168,578
  1,227,309
  1,288,960
  1,353,678
  1,421,617
Adjusted assets (=assets-cash), $m
  317,054
  334,286
  352,203
  370,955
  390,584
  411,138
  432,666
  455,219
  478,851
  503,618
  529,580
  556,797
  585,336
  615,264
  646,653
  679,577
  714,116
  750,351
  788,369
  828,261
  870,121
  914,051
  960,153
  1,008,539
  1,059,323
  1,112,628
  1,168,578
  1,227,309
  1,288,960
  1,353,678
  1,421,617
Revenue / Adjusted assets
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
Average production assets, $m
  69,423
  73,138
  77,059
  81,161
  85,456
  89,953
  94,663
  99,597
  104,768
  110,187
  115,867
  121,822
  128,066
  134,614
  141,481
  148,685
  156,241
  164,169
  172,487
  181,215
  190,374
  199,985
  210,072
  220,658
  231,769
  243,432
  255,673
  268,523
  282,012
  296,171
  311,036
Working capital, $m
  0
  -18,382
  -19,368
  -20,399
  -21,478
  -22,608
  -23,792
  -25,033
  -26,332
  -27,694
  -29,122
  -30,618
  -32,188
  -33,833
  -35,559
  -37,370
  -39,269
  -41,262
  -43,352
  -45,546
  -47,848
  -50,264
  -52,799
  -55,460
  -58,252
  -61,183
  -64,260
  -67,490
  -70,880
  -74,439
  -78,175
Total debt, $m
  136,211
  119,632
  134,253
  149,554
  165,572
  182,344
  199,911
  218,314
  237,598
  257,808
  278,992
  301,202
  324,489
  348,910
  374,524
  401,390
  429,573
  459,141
  490,164
  522,716
  556,874
  592,720
  630,340
  669,823
  711,263
  754,759
  800,415
  848,339
  898,647
  951,456
  1,006,895
Total liabilities, $m
  289,356
  272,777
  287,398
  302,699
  318,717
  335,489
  353,056
  371,459
  390,743
  410,953
  432,137
  454,347
  477,634
  502,055
  527,669
  554,535
  582,718
  612,286
  643,309
  675,861
  710,019
  745,865
  783,485
  822,968
  864,408
  907,904
  953,560
  1,001,484
  1,051,792
  1,104,601
  1,160,040
Total equity, $m
  75,827
  61,509
  64,805
  68,256
  71,867
  75,649
  79,611
  83,760
  88,109
  92,666
  97,443
  102,451
  107,702
  113,209
  118,984
  125,042
  131,397
  138,065
  145,060
  152,400
  160,102
  168,185
  176,668
  185,571
  194,916
  204,723
  215,018
  225,825
  237,169
  249,077
  261,578
Total liabilities and equity, $m
  365,183
  334,286
  352,203
  370,955
  390,584
  411,138
  432,667
  455,219
  478,852
  503,619
  529,580
  556,798
  585,336
  615,264
  646,653
  679,577
  714,115
  750,351
  788,369
  828,261
  870,121
  914,050
  960,153
  1,008,539
  1,059,324
  1,112,627
  1,168,578
  1,227,309
  1,288,961
  1,353,678
  1,421,618
Debt-to-equity ratio
  1.796
  1.940
  2.070
  2.190
  2.300
  2.410
  2.510
  2.610
  2.700
  2.780
  2.860
  2.940
  3.010
  3.080
  3.150
  3.210
  3.270
  3.330
  3.380
  3.430
  3.480
  3.520
  3.570
  3.610
  3.650
  3.690
  3.720
  3.760
  3.790
  3.820
  3.850
Adjusted equity ratio
  0.110
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184
  0.184

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8,831
  5,462
  5,983
  6,536
  7,118
  7,731
  8,377
  9,057
  9,774
  10,529
  11,325
  17,306
  18,190
  19,121
  20,103
  21,138
  22,228
  23,377
  24,587
  25,863
  27,207
  28,624
  30,116
  31,688
  33,344
  35,089
  36,927
  38,862
  40,901
  43,049
  45,310
Depreciation, amort., depletion, $m
  4,997
  9,703
  9,846
  9,995
  10,151
  10,315
  10,486
  10,666
  10,854
  11,051
  11,257
  4,430
  4,657
  4,895
  5,145
  5,407
  5,682
  5,970
  6,272
  6,590
  6,923
  7,272
  7,639
  8,024
  8,428
  8,852
  9,297
  9,764
  10,255
  10,770
  11,310
Funds from operations, $m
  -9,741
  15,165
  15,829
  16,531
  17,269
  18,046
  18,863
  19,723
  20,628
  21,580
  22,582
  21,736
  22,847
  24,016
  25,248
  26,544
  27,909
  29,346
  30,860
  32,453
  34,130
  35,896
  37,755
  39,712
  41,772
  43,941
  46,224
  48,627
  51,156
  53,818
  56,620
Change in working capital, $m
  -9,497
  -942
  -985
  -1,031
  -1,079
  -1,130
  -1,184
  -1,240
  -1,300
  -1,362
  -1,428
  -1,497
  -1,569
  -1,646
  -1,726
  -1,811
  -1,899
  -1,993
  -2,091
  -2,194
  -2,302
  -2,416
  -2,535
  -2,661
  -2,793
  -2,931
  -3,077
  -3,230
  -3,390
  -3,559
  -3,736
Cash from operations, $m
  -244
  16,107
  16,814
  17,562
  18,349
  19,176
  20,047
  20,963
  21,927
  22,942
  24,010
  23,233
  24,416
  25,662
  26,974
  28,355
  29,809
  31,339
  32,950
  34,646
  36,432
  38,311
  40,290
  42,373
  44,565
  46,872
  49,301
  51,857
  54,546
  57,377
  60,356
Maintenance CAPEX, $m
  0
  -2,524
  -2,660
  -2,802
  -2,951
  -3,107
  -3,271
  -3,442
  -3,622
  -3,810
  -4,007
  -4,213
  -4,430
  -4,657
  -4,895
  -5,145
  -5,407
  -5,682
  -5,970
  -6,272
  -6,590
  -6,923
  -7,272
  -7,639
  -8,024
  -8,428
  -8,852
  -9,297
  -9,764
  -10,255
  -10,770
New CAPEX, $m
  -7,199
  -3,715
  -3,920
  -4,103
  -4,295
  -4,497
  -4,710
  -4,934
  -5,170
  -5,419
  -5,680
  -5,955
  -6,244
  -6,548
  -6,868
  -7,204
  -7,557
  -7,928
  -8,318
  -8,728
  -9,159
  -9,611
  -10,087
  -10,586
  -11,111
  -11,662
  -12,241
  -12,850
  -13,489
  -14,160
  -14,864
Cash from investing activities, $m
  49,202
  -6,239
  -6,580
  -6,905
  -7,246
  -7,604
  -7,981
  -8,376
  -8,792
  -9,229
  -9,687
  -10,168
  -10,674
  -11,205
  -11,763
  -12,349
  -12,964
  -13,610
  -14,288
  -15,000
  -15,749
  -16,534
  -17,359
  -18,225
  -19,135
  -20,090
  -21,093
  -22,147
  -23,253
  -24,415
  -25,634
Free cash flow, $m
  48,958
  9,867
  10,234
  10,657
  11,103
  11,572
  12,066
  12,586
  13,135
  13,713
  14,323
  13,064
  13,742
  14,457
  15,211
  16,007
  16,845
  17,730
  18,662
  19,646
  20,683
  21,777
  22,931
  24,147
  25,430
  26,782
  28,207
  29,710
  31,293
  32,963
  34,722
Issuance/(repayment) of debt, $m
  -58,411
  14,135
  14,621
  15,301
  16,018
  16,772
  17,567
  18,403
  19,284
  20,210
  21,184
  22,210
  23,288
  24,421
  25,613
  26,866
  28,183
  29,568
  31,023
  32,552
  34,158
  35,846
  37,620
  39,483
  41,440
  43,496
  45,656
  47,924
  50,307
  52,810
  55,438
Issuance/(repurchase) of shares, $m
  -21,429
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -80,325
  14,135
  14,621
  15,301
  16,018
  16,772
  17,567
  18,403
  19,284
  20,210
  21,184
  22,210
  23,288
  24,421
  25,613
  26,866
  28,183
  29,568
  31,023
  32,552
  34,158
  35,846
  37,620
  39,483
  41,440
  43,496
  45,656
  47,924
  50,307
  52,810
  55,438
Total cash flow (excl. dividends), $m
  -32,513
  24,002
  24,855
  25,958
  27,120
  28,344
  29,632
  30,990
  32,419
  33,923
  35,508
  35,274
  37,030
  38,879
  40,825
  42,873
  45,029
  47,297
  49,685
  52,198
  54,842
  57,624
  60,551
  63,630
  66,870
  70,278
  73,863
  77,634
  81,601
  85,772
  90,160
Retained Cash Flow (-), $m
  22,446
  -3,097
  -3,297
  -3,450
  -3,612
  -3,782
  -3,961
  -4,150
  -4,348
  -4,557
  -4,777
  -5,008
  -5,251
  -5,507
  -5,776
  -6,058
  -6,355
  -6,667
  -6,995
  -7,340
  -7,702
  -8,083
  -8,483
  -8,903
  -9,344
  -9,808
  -10,295
  -10,806
  -11,344
  -11,908
  -12,501
Prev. year cash balance distribution, $m
 
  17,415
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  38,321
  21,558
  22,508
  23,508
  24,562
  25,671
  26,840
  28,070
  29,366
  30,731
  30,266
  31,779
  33,372
  35,049
  36,815
  38,674
  40,630
  42,690
  44,858
  47,139
  49,541
  52,068
  54,727
  57,525
  60,470
  63,568
  66,828
  70,257
  73,864
  77,659
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  35,449
  18,311
  17,414
  16,426
  15,358
  14,227
  13,047
  11,837
  10,618
  9,408
  7,743
  6,698
  5,710
  4,791
  3,954
  3,206
  2,552
  1,991
  1,522
  1,137
  831
  592
  411
  278
  183
  116
  72
  43
  25
  14
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

General Electric Company is a global digital industrial company. The Company's products and services range from aircraft engines, power generation, and oil and gas production equipment to medical imaging, financing and industrial products. Its segments include Power, which includes products and services related to energy production; Renewable Energy, which offers renewable power sources; Oil & Gas, including liquefied natural gas and pipelines; Aviation, which includes commercial and military aircraft engines, and integrated digital components, among others; Healthcare, which provides healthcare technologies in medical imaging, digital solutions, patient monitoring and diagnostics, and drug discovery, among others; Transportation, which is a supplier to the railroad, mining, marine, stationary power and drilling industries; Energy Connections & Lighting, which includes Energy Connections and Lighting businesses, and Capital, which is a financial services division.

FINANCIAL RATIOS  of  General Electric (GE)

Valuation Ratios
P/E Ratio 23.6
Price to Sales 1.7
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow -853.8
Price to Free Cash Flow -28
Growth Rates
Sales Growth Rate 5.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.5%
Cap. Spend. - 3 Yr. Gr. Rate 1.3%
Financial Strength
Quick Ratio 2
Current Ratio NaN
LT Debt to Equity 139.1%
Total Debt to Equity 179.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. 2.1%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity 10.1%
Return On Equity - 3 Yr. Avg. 5.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 26.2%
Gross Margin - 3 Yr. Avg. 27%
EBITDA Margin 16%
EBITDA Margin - 3 Yr. Avg. 18.6%
Operating Margin 8.3%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 7.3%
Pre-Tax Margin - 3 Yr. Avg. 7.7%
Net Profit Margin 7.1%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate -5.1%
Eff/ Tax Rate - 3 Yr. Avg. 27.2%
Payout Ratio 99.7%

GE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GE stock intrinsic value calculation we used $123692 million for the last fiscal year's total revenue generated by General Electric. The default revenue input number comes from 2016 income statement of General Electric. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GE stock valuation model: a) initial revenue growth rate of 5.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.1%, whose default value for GE is calculated based on our internal credit rating of General Electric, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of General Electric.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GE stock the variable cost ratio is equal to 85.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7912 million in the base year in the intrinsic value calculation for GE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for General Electric.

Corporate tax rate of 27% is the nominal tax rate for General Electric. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GE are equal to 56.1%.

Life of production assets of 27.5 years is the average useful life of capital assets used in General Electric operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GE is equal to -14.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $75827 million for General Electric - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 8657.99 million for General Electric is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of General Electric at the current share price and the inputted number of shares is $206.3 billion.

Articles on GE

What is next for GE?

GE should put emphasis on innovation and development of new wonderful products. This is the only recipe for the company’s revival. Selling its business units will only lead to further decline.  [October 22, 2017]  read article

Sell GE before it is really too late

GE share price is just a reflection of the company’s former CEO pathetic performance. In substance, things are not going to change under his successor. It is all about the culture of “appearance first” and self-praise.  [June 16, 2017]  read article

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COMPANY NEWS

▶ GE Shares Tumble on Multiple Rating Downgrades   [12:33PM  Bloomberg Video]
▶ Cranley: City offered Amazon same incentives given to GE   [12:12PM  American City Business Journals]
▶ Arconic Tumbles After Earnings Miss; Ex-GE Exec Named CEO   [10:54AM  Investor's Business Daily]
▶ GE Investors, Settle In for a Grind   [08:34AM  Bloomberg]
▶ GE Compensation Moves Expected to Focus on Performance   [06:21AM  The Wall Street Journal]
▶ Trump's Pro-Growth Plan Falling Into Place   [Oct-22-17 09:58PM  Forbes]
▶ GE's Dividend Saga Is Far From Over   [11:21AM  TheStreet.com]
▶ GE's Dividend Saga Is Far From Over   [12:00PM  TheStreet.com]
▶ [$$] Dow 23,000: One Slow Grind Upward   [12:01AM  Barrons.com]
▶ [$$] General Electrics Kitchen Sink May Still Have Holes   [10:59PM  The Wall Street Journal]
▶ [$$] GE's Other Problem: Complex Financial Reporting   [10:01PM  The Wall Street Journal]
▶ [$$] General Electric's Kitchen Sink May Still Have Holes   [04:18PM  The Wall Street Journal]
▶ Stocks close near session highs   [04:00PM  CNBC Videos]
▶ GEs Tough Road Ahead   [03:37PM  Bloomberg]
▶ [$$] GE: electric slide   [01:43PM  Financial Times]
▶ Dow Gaps Up Again To Record High; JPMorgan, Goldman Lead   [12:12PM  Investor's Business Daily]
▶ GE Upstaged by Offspring Synchrony   [11:55AM  Barrons.com]
Financial statements of GE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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