General Electric Company Has Turned A Corner

Summary

  • This article analyzes General Electric from the perspective of its profit sustainability by the two most important metrics: return on capital employed and capital allocation.
  • The results show that GE’s profitability has turned a corner recently as GE is transitioning back to its industrial roots, the economy continues to recover from the pandemic, and its renewable businesses begin to contribute.
  • Even though its current ROCE is still a far cry from its historical averages, a decent long-term return can be expected now under the current valuation in the mid to upper single-digit range.
General Electric GEnx Engine

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Thesis and Background

This article analyzes General Electric (NYSE:GE) from the perspective of its profit sustainability by the most important two profit metrics: return on capital employed (“ROCE”) and capital allocation. Note that ROCE is different from the return on equity (“ROE”) and is more

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Sensor Unlimited is an economist by training with a PhD, with a focus on financial economics. She is a quantitative modeler and for the past decade she has been covering the mortgage market, commercial market, and the banking industry. She writes about asset allocation and ETFs, particularly those related to the overall market, bonds, banking and financial sectors, and housing markets.

Sensor Unlimited contributes to the investing group Envision Early Retirement which is led by Sensor Unlimited. They offer proven solutions to generate both high income and high growth with isolated risks through dynamic asset allocation. Features include: two model portfolios - one for short-term survival/withdrawal and one for aggressive long-term growth, direct access via chat to discuss ideas, monthly updates on all holdings, tax discussions, and ticker critiques by request. Learn More.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

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