General Electric: Company Analysis

Sep.19.12 | About: General Electric (GE)

There is a lot of uncertainty that will be striking the market this coming November with the elections. While not knowing who our upcoming president will be can be unsettling for investors, investing into established, low risk companies with dividend protection is the best way to go to protect your money. General Electric (NYSE:GE) is a terrific, established technology company that has seen its share price rise over 16% thus far in 2012, but is it priced fairly enough to consider buying?

General Electric's earnings per share increased again this past quarter, marking two straight years of EPS growth. GE's bottom line earnings were also increased from $1.14 per share in the previous year to $1.23 per share in the last fiscal year. Analysts expect EPS growth to continue as well, and expect the bottom line EPS to be $1.55 this year, an increase in $0.32 from the previous year. Much of the earnings growth can be attributed to the company's energy division. It's revamped, and has been growing at double digit rates, increasing overall company profits 13% alone.

Several research analysts recently increased their price targets for GE as well. Barclays Capital increased its price target from $22 to $24. JPMorgan Chase upped its price target from $21 to $22. Citigroup rose its target to $25 from $23. Citigroup also has a "buy"rating on the stock. Despite all the positive notes from the analysts and earnings, I remain very impartial on this stock currently.

GE is a great company, but over the past year the stock has already risen 33% and outpaced the S&P 500 Index. GE has a P/E ratio of 18.1, compared to an industry P/E of 17.5. Yes, GE is a top notch company and perhaps can carry a higher P/E ratio than some of its competitors, however I think it is a little pricey to buy into at current levels.

Finding a value investment isn't easy and requires much patience. GE isn't a value investment because its share price has ascended too quickly over the past year. Competitors such as Siemens AG (SI), Koninklijke Philips Electronics (NYSE:PHG), and ABB Ltd. (NYSE:ABB) are all in the same category, too expensive at the moment. For discount stocks, consider looking at natural gas or raw metals companies such as Cliffs Natural Resources (NYSE:CLF), Apache (NYSE:APA), or Exxon Mobil (NYSE:XOM). These companies have all been beaten down due to decreasing natural gas prices and high interest rates in China. However, natural gas prices have bottomed out and are starting to ascend, and China is expected to lower interest rates soon after they have decreased their inflation rate to below the target of 4%. Watch these companies, I believe all three are a terrific value buy.

Disclosure: I am long CLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.