If you’re looking for short-term gains, General Electric (NYSE:GE) is not exactly what you’d consider a compelling buy. GE stock is regarded as a moderate buy on Wall Street, with potential upside of 4%.
The GE stock price is up almost 50% year to date, but this is still a far cry from where the company’s shares were just a few years ago. But General Electric does have long-term potential, which could make it a good buy for the right investor. Consider the following four factors before investing in General Electric stock.
1. GE still has a heavy debt load
One of the biggest issues General Electric has to address is its heavy debt load. In 2017, the company’s total debt topped $135 billion. GE has pared down on this number since, but the company still has more than $115 billion in outstanding debt, far exceeding the company’s yearly earnings.
2. General Electric’s healthcare business is growing
General Electric is currently in the process of selling its biopharma business to Danaher (NYSE:DHR) for $21 billion. Once that’s done, the company will be re-evaluating what’s left of its healthcare business.
Simply put, GE Healthcare is a medical device company that brings in $17 billion in revenue and has strong free cash flow conversion. It’s not the most profitable business segment, but it is growing at a stable rate.
3. Aviation could help GE stock take off
One of General Electric’s most-valuable assets is its aviation segment. The company produces engines that power commercial airplanes, military planes, and helicopters. This segment alone generated $55 billion in new sales at June’s Paris Air Show. The strength of GE’s aviation business alone may make it worth holding onto the stock.
4. Wall Street is lukewarm on GE stock
On Wall Street, General Electric is considered somewhat of a controversial topic. Most analysts are supportive of the company’s not-so-new CEO, Larry Culp, and agree he’s the right person for the job.
Culp was able to pay down a substantial amount of GE’s debt by selling off many of the company’s assets. He’s also been working to improve the company’s operations.
But it’s still up for debate whether Culp alone will be enough to propel GE stock forward. The stock is considered a moderate buy on Wall Street, and most analysts see very little upside in General Electric stock’s future.
Bottom Line on GE Stock
All in all, most people are divided when it comes to GE stock. The company has acknowledged that 2019 is a rebuilding year, and GE has made a number of promising steps forward.
The company has many promising business segments, but there are still many headwinds in its future. It may be a good idea to wait before investing in General Electric.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.