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GE Worst Dow Performer of the Year

GE has an iconic name, but it has been the worst Dow Jones Industrial Average performer this year. The company is planning to reduce the size of the company and focus on aviation, power and healthcare. CEO, John Flannery believes that the business has become too complicated and I agree with him, says investment advisor Brent Wilsey.

Based on valuations, Wilsey believes this company has been too expensive since 2015 when GE was trading at around $28/share.

“Even today, the company has a P/E multiple of 23. Even if I look out to December 2019 estimated EPS of $1.16 would give me a forward P/E of 16.4.

“This is not a great value given that sales have plateaued and EPS has fallen over the last year. I also believe we could see these estimates continue to fall given the unclear picture of the business’s direction. This would then increase the forward multiple.

“GE also announced it is cutting its dividend by 50%. This is a necessary action for the company to continue as prior to the cut, it had a dividend payout ratio of 108.9%. This means it was paying a larger dividend than what it was making in earnings. That is a worrisome signal.

“Given the uncertainty we believe this company could fall further and would place a sell rating on the company. If it falls to the $14- $15 range it could be worth a further look.”

Source: Brent M. Wilsey, highly regarded registered investment advisor and a seasoned financial strategist with over 40 years of experience in the field, owns and operates San Diego-based Wilsey Asset Management

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