DCF Studio

    GE · NYQ · Industrials

    GE Aerospace

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 102.55

    Market price

    USD 314.27

    Implied upside

    -67.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 33.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 102.55-67.4%
    Exit multiple
    USD 239.21-23.9%
    Market price
    USD 314.27

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn7bn13bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 53.3bnUSD 62.0bnUSD 72.2bnUSD 83.9bnUSD 97.6bn+16.3%
    EBITUSD 8.3bnUSD 9.6bnUSD 11.2bnUSD 13.0bnUSD 15.2bn+16.3%
    NOPATUSD 7.3bnUSD 8.5bnUSD 9.9bnUSD 11.5bnUSD 13.4bn+16.3%
    Add depreciation & amortisationUSD 1.7bnUSD 2.0bnUSD 2.4bnUSD 2.8bnUSD 3.2bn+16.3%
    Less capital expenditureUSD -1.4bnUSD -1.6bnUSD -1.8bnUSD -2.1bnUSD -2.5bn+16.3%
    Less increase in working capitalUSD -491.6mUSD -571.8mUSD -665.1mUSD -773.6mUSD -899.8m+16.3%
    Free cashflow to firmUSD 7.2bnUSD 8.4bnUSD 9.7bnUSD 11.3bnUSD 13.2bn+16.3%
    Discount factor0.94770.85110.76430.68640.6164-
    Present valueUSD 6.8bnUSD 7.1bnUSD 7.4bnUSD 7.8bnUSD 8.1bn+4.5%
    Present Value Of The ForecastUSD 37.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.235Reported 1.350, pulled toward 1.0 (Blume)
    Cost of equity11.79%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 326.1bn94.1% of capital
    Total debtUSD 20.5bn5.9% of capital, book value as a proxy
    Tax rate11.9%Effective, capped at statutory
    WACC11.35%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 102.55

    68% of EV

    Forecast FCFF, final year
    USD 13.2bn
    Capex at depreciation, working capital in reinvestment
    USD 14.2bn
    Less reinvestment at g/ROIC (20.7% of NOPAT)
    USD -2.9bn
    Capitalised
    USD 11.3bn
    ROIC (reported)
    12.1%
    Terminal value, undiscounted
    USD 130.3bn
    Terminal value, discounted
    USD 80.3bn
    Enterprise value
    USD 117.6bn
    Less net debt
    USD 8.1bn
    Equity value
    USD 109.5bn

    Exit at 20.0x EBITDA

    Value per shareUSD 239.21

    86% of EV

    Terminal value, undiscounted
    USD 367.1bn
    Terminal value, discounted
    USD 226.3bn
    Enterprise value
    USD 263.6bn
    Less net debt
    USD 8.1bn
    Equity value
    USD 255.5bn

    Spread between methods: 80%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.35%129.67131.92134.46137.33140.63
    10.35%113.85115.11116.47117.98119.65
    11.35%101.26101.89102.55103.25104.00
    12.35%91.2391.5591.8792.1992.50
    13.35%83.2883.5683.8584.1384.41

    Outlined: this model. Green text: above today's price of 314.27. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year16.3%48.0%+31.7pp
    EBIT margin15.5%46.5%+31.0pp
    Discount rate11.4%5.5%-5.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.