General Electric has declined more than 30% from $16.18 a share to a recent low of around $11 a share in just over eight months since our quantitative model downgraded the stock to a "Sell" from a "Hold" on January 25, 2018.
Quant Ratings evaluates thousands of stocks on a daily basis using a quantitative model that combines fundamental analysis of a firm's latest financial statements with technical analysis of a stock's price moves. You can check out Quant Ratings here.
The current grade of D+ is the highest possible "Sell" rating. One notch higher to C- would return General Electric to the group of stocks in the "Hold" range where risk and reward are in balance. With today's stock performance, the shares of General Electric are still down by 22.4% since the January downgrade. An upgrade to "Hold" by our model is possible with a continuation of today's positive share movement or a positive surprise in the earnings expected to be reported later this month.
Below is an excerpt from Quant Ratings' latest analysis of General Electric:
Recently, TheStreet Quant Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate GENERAL ELECTRIC CO as a Sell with a ratings score of D+. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and poor profit margins.
Highlights from the analysis by TheStreet Quant Ratings goes as follows:
The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Industrial Conglomerates industry. The net income has decreased by 23.8% when compared to the same quarter one year ago, dropping from $1,051.00 million to $801.00 million.
The debt-to-equity ratio is very high at 2.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Industrial Conglomerates industry and the overall market, GENERAL ELECTRIC CO's return on equity significantly trails that of both the industry average and the S&P 500.
Net operating cash flow has significantly decreased to $557.00 million or 74.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
The gross profit margin for GENERAL ELECTRIC CO is currently lower than what is desirable, coming in at 29.78%. Regardless of GE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GE's net profit margin of 2.66% is significantly lower than the industry average.
You can view the full analysis from the report here: GE
-- Reported by Kevin Baker in Palm Beach Gardens, FL