GE Aerospace (GE)

Conclusion

GE Aerospace designs and produces commercial and defense aircraft engines, engine components and aircraft systems, and reports through two segments: Commercial Engines & Services and Defense & Propulsion Technologies. At a price of 335.54 USD on 2026-11-09, the company has a market capitalisation of 348.1 billion USD and an enterprise value of 358.7 billion USD.

The verdict is overvalued. The price-to-earnings ratio of 38.2x is above its ten-year median of 28.5x, and enterprise value to EBITDA of 28.6x is above its median of 16.8x. The discounted cash flow gives 73.18 USD per share at a discount rate of 11.92%. The fair value band runs from 106.44 to 159.67 USD with a midpoint of 133.06 USD, a margin of safety of -60.4% at the current price. The reverse DCF implies growth of 22.4% a year, while revenue has shrunk at a five-year compound rate of -9.6% and earnings per share have grown 9.4% a year over five years.

What holds the case up is a ROIC of 35.4% against a WACC of 11.5%, an operating margin of 19.2% against a ten-year median of 6.3%, and an Altman Z-score of 3.64. What would break it is the revenue decline, with a three-year compound rate of -15.7% and growth in only 4 of 10 comparable years, the premium multiples, with price-to-book at 19.9x against a median of 2.1x, and a current ratio of 0.98.

Financial health

The colour of financial strength is green, held up by the Altman Z-score, net debt to EBITDA and interest coverage, with the current ratio the only neutral signal. The company has a current ratio of 0.98 and a quick ratio of 0.54, which leaves little liquidity beyond inventory and receivables. Net debt to EBITDA is 0.84x, debt to equity is 1.10x and interest coverage is 12.5x. The Altman Z-score is 3.64, in the safe zone, although the Altman model was designed for manufacturers and GE Aerospace is one, so the reading applies directly. Insolvency risk: low, about 1.6% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31. The company does not report a debt maturity schedule in this analysis, so the timing of repayments cannot be judged here.

Earnings quality

The colour of earnings quality is green, held up by the Beneish score, free cash flow conversion and the falling share count, with the Piotroski score neutral. Free cash flow conversion is 87.5% on a trailing twelve-month basis and 113.6% over five years. The accrual ratio is 0.13%, so reported earnings are backed by cash. Free cash flow after stock-based compensation is 7.96 billion USD, but the stock-based compensation to revenue ratio is not available because the company does not report it in the data. The share count has fallen at a five-year compound rate of -0.52%, which points to buybacks. The Piotroski score is 5 of 9 and the Beneish M-score is -2.20, labelled unlikely. The company beat earnings estimates in all 8 of the last quarters, with an average surprise of 14.9%. The next-year earnings estimate has risen 2.7% over 90 days, with 7 upward revisions and 1 downward in the last 30 days.

Profitability

The colour of profitability is green, held up by all four signals, with ROIC above WACC the strongest. The gross margin is 35.2% against a ten-year median of 27.4%. The operating margin is 19.2% against a median of 6.3%, and the net margin is 17.3% against a median of 3.3%. Operating margin stability is 0.93. ROIC is 35.4% against a WACC of 11.5%, giving a ROIC minus WACC of 23.9 percentage points, and the five-year median ROIC is 29.5%. Return on equity is 51.9%, but leverage inflates it. The DuPont split shows a net margin of 19.0%, an asset turnover of 0.35 and an equity multiplier of 6.97, so most of the high return on equity comes from the balance sheet structure rather than from asset efficiency alone.

Growth

The colour of growth is red, pulled down by the revenue trend and the consistency of revenue growth, with earnings growth and the next-year estimate supportive. Revenue compounds at -15.7% over three years, -9.6% over five years and -8.8% over ten years. Revenue grew in only 4 of 10 comparable years. Earnings per share compounded at 212.8% over three years and 9.4% over five years, a much better picture than revenue, and the next-year earnings estimate points to growth of 14.1%. Free cash flow per share compounded at 16.3% over three years and 107.5% over five years, but at -3.8% over ten years. The share count reduction explains part of the per-share gains, while the revenue base has contracted over every window longer than one year.

Valuation

The colour of valuation is red, because the verdict is overvalued and the margin of safety is negative. The price-to-earnings ratio is 38.2x against a ten-year median of 28.5x, a premium of 34.3%. Enterprise value to EBITDA is 28.6x against 16.8x, a premium of 70.2%. Price to free cash flow is 43.7x against 33.6x, a premium of 30.1%. Price to sales is 6.6x against 1.05x, a premium of 530.1%, and price to book is 19.9x against 2.1x, a premium of 846.1%. The discounted cash flow gives 73.18 USD per share at a discount rate of 11.92%, with terminal growth of 2.5% and the terminal value making up 39.9% of the total. The fair value from historical multiples is 192.93 USD. The fair value band runs from 106.44 to 159.67 USD with a midpoint of 133.06 USD, which is a fair value estimate built on fixed assumptions and is not a price target. The reverse DCF implies growth of 22.4% a year, against a five-year revenue compound rate of -9.6%. The dividend yield is 0.5% and the payout on free cash flow is 21.9%.

Risks

The main risk is that the premium multiples persist only if the revenue decline reverses, since the reverse DCF needs 22.4% annual growth while revenue has shrunk over three and five years. A current ratio of 0.98 and a quick ratio of 0.54 leave little buffer if operating cash flow weakens, although the net debt to EBITDA of 0.84x and interest coverage of 12.5x suggest that debt service is comfortable today. A DCF value of 73.18 USD against a price of 335.54 USD shows how much the price depends on assumptions beyond the cash flows already generated. Stock-based compensation to revenue is not available, so the cost of equity compensation cannot be fully assessed. This analysis has no debt maturity schedule and no revenue by segment, so it cannot show which parts of the business drive the revenue decline or when debt falls due.