General Electric Co GE

Gartman on General Electric GE

[jerryb1]

Newsletter writer Dennis Gartman, who made a bullish call on GE yesterday along with several other industrial firms, like U.S. Steel and Alcoa. In a phone conversation, Gartman told me he sold his GE stake this morning as the stock tumbled even while the broader market rallied. "Sometimes it only takes a day to figure out I'm wrong," he said. – Aaron Task

From The Business Insider, March 4, 2009:
We figured that, by now, GE's demolished stock must be screamingly cheap (because people were telling us it was cheap when it was $25). So we looked at the numbers. To our surprise, GE's still not cheap.
Even in its shriveled state, GE is still trading at 17X trailing free cash flow. In a rip-roaring bull market, that might be reasonable (might). In today's market, it's startlingly expensive.

Source www.amprogram.com

How do we get there?
At $7, GE has an equity market cap of $75 billion and net debt of $475 billion. Add those together, and you get an enterprise value of $550 billion. Last year, GE had free cash flow (operating cash flow less capital expenditures) of $32 billion. $550 billion divided by $32 billion gets you 17X.
(True, finance businesses like GE Capital aren't often viewed this way, but GE has some industrial operations, too. And, ultimately, all that matters is to stakeholders is their share of the cash flow).