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If you are wondering whether GE HealthCare Technologies is priced attractively right now or if the current share price already reflects its potential, this article walks you through what the numbers are saying about value.
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The stock last closed at US$82.58, with returns of 4.2% over the past week, a 2.9% decline over the last 30 days, a 0.3% decline year to date, and a 5.1% decline over the past year, while the 3 year return sits at 18.3%.
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Recent attention on GE HealthCare has been supported by ongoing coverage of the company as a stand alone medical technology and diagnostics business, following its separation from General Electric. This continuing interest helps frame how investors are reacting to the share price moves you see today.
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On Simply Wall St’s 6 point value check, GE HealthCare scores a 5 out of 6. Next, we will look at how different valuation methods arrive at that score, before finishing with a more holistic way to think about what the stock might be worth.
GE HealthCare Technologies delivered -5.1% returns over the last year. See how this stacks up to the rest of the Medical Equipment industry.
A Discounted Cash Flow, or DCF, model takes projected future cash flows and then discounts them back to today using a required return, to estimate what the business might be worth right now.
For GE HealthCare Technologies, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in $. The latest twelve month free cash flow is about $1.55b. Analysts provide explicit free cash flow estimates for the next few years, and Simply Wall St then extrapolates those out to build a 10 year path of cash flows that gradually moderates over time.
Under this set of projections, free cash flow in 2035 is modeled at around $4.59b, with each future year discounted back to today and summed. The result is an estimated intrinsic value of US$141.92 per share, compared with the recent share price of US$82.58.
This implies an intrinsic discount of 41.8%, which indicates that the shares are currently priced below the DCF estimate of value.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests GE HealthCare Technologies is undervalued by 41.8%. Track this in your watchlist or portfolio, or discover 868 more undervalued stocks based on cash flows.
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for GE HealthCare Technologies.
For a profitable company like GE HealthCare Technologies, the P/E ratio is a useful way to relate what you pay for each share to the earnings the business is currently producing. It gives you a quick sense of how the market is weighing those earnings today.
What counts as a “normal” P/E really depends on how the market views growth potential and risk. Higher expected earnings growth or lower perceived risk can support a higher multiple, while slower growth or higher risk usually points to a lower one.
GE HealthCare trades on a P/E of 18.05x, compared with the Medical Equipment industry average of about 30.64x and a peer group average of 36.59x. Simply Wall St also calculates a proprietary “Fair Ratio” of 28.39x for GE HealthCare. This Fair Ratio is designed to reflect the P/E you might expect given the company’s earnings growth profile, industry, profit margins, market cap and specific risks.
Because it blends these company specific factors, the Fair Ratio can be more informative than a simple comparison with broad industry or peer averages. With the current P/E of 18.05x sitting below the Fair Ratio of 28.39x, the shares screen as undervalued on this metric.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1426 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which let you attach a clear story to your numbers by linking your view of a company’s future revenue, earnings, margins and fair value to a simple forecast that you can compare with today’s price.
On Simply Wall St’s Community page, Narratives are an easy tool used by millions of investors, helping you see how your own fair value estimate stacks up against the current share price and how that gap might guide your decision about when to buy or sell.
Each Narrative connects three pieces: what you think is happening in the business, the forecast that flows from that view, and the fair value that drops out of those assumptions. It then updates automatically as fresh information such as news or earnings is added to the platform.
For GE HealthCare, one investor might build a Narrative that assumes a relatively high fair value with stronger long term revenue and margin assumptions, while another might set a much lower fair value based on more cautious expectations. You can see both side by side and decide which story makes more sense to you.
Do you think there’s more to the story for GE HealthCare Technologies? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include GEHC.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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