GE AerospaceGENYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $187.43 per share(market-calibrated)

-44.4%

Upside to Fair Value

Current

$337.31

Pure Model

$137.48

Fair Value

$187.43

Bull Case

$176.77

Bear Case

$103.23

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor GE

✓

CapEx already efficient

CapEx at 2.70% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 16.25% — below the sector mature average of 19.13%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $14.3B (16.25% margin).

→

Moderate revenue growth

Analyst consensus projects 4.75% revenue growth, fading to 2.25% by Year 10. Revenue reaches $88.0B (vs $45.9B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $110.27/share (12.5x terminal FCF) while exit multiple gives $164.69/share (23.9x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $337.31. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.47% indicates efficient cash generation. FCF reaches $13.8B by Year 10 (15.68% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.38

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.73%

Cost of Debt

Pre-tax Cost of Debt5.84%

Tax Rate14.05%

After-tax Cost of Debt5.02%

Equity Weight (E/V)94.61%

Debt Weight (D/V)5.39%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (94.61% × 10.73%) + (5.39% × 5.02%)

= 10.42%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$48.0B	$57.8B	$68.2B	$78.8B	$88.0B
EBIT	$7.8B	$9.4B	$11.1B	$12.8B	$14.3B
Tax	$1.1B	$1.3B	$1.6B	$1.8B	$2.0B
NOPAT	$6.7B	$8.1B	$9.5B	$11.0B	$12.3B
+ Depreciation	$2.2B	$2.6B	$3.1B	$3.6B	$4.0B
- Capex	$1.3B	$1.6B	$1.8B	$2.1B	$2.4B
- Δ NWC	$115M	$248M	$321M	$264M	$102M
Free Cash Flow	$7.5B	$8.9B	$10.5B	$12.2B	$13.8B
Discount Factor	0.906	0.743	0.609	0.500	0.371
Present Value	$6.8B	$6.6B	$6.4B	$6.1B	$5.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$13.8B

Terminal Growth Rate2.25%

WACC10.42%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$172.7B

PV of Terminal Value$64.1B

Exit Multiple Method

Year 10 EBITDA$18.3B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$329.2B

PV of Terminal Value$122.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$61.7B

PV of Terminal Value$64.1B

Enterprise Value$125.8B

(-) Net Debt$8.1B

Equity Value$117.7B

Shares Outstanding1.1B

Price per Share$110.27

Exit Multiple Method

PV of Projected FCFs$61.7B

PV of Terminal Value$122.2B

Enterprise Value$183.8B

(-) Net Debt$8.1B

Equity Value$175.7B

Shares Outstanding1.1B

Price per Share$164.69

Pure Model Fair Value

$137.48

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
8.42%	$165.54	$168.81	$172.60	$177.07	$182.40
9.42%	$148.33	$150.62	$153.24	$156.24	$159.74
10.42%	$133.94	$135.61	$137.48	$139.59	$142.00
11.42%	$121.67	$122.92	$124.29	$125.83	$127.55
12.42%	$111.06	$112.01	$113.05	$114.19	$115.46

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$103.23

-69.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.73

Base Case

$137.48

-59.2% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.38

Bull Case

$176.77

-47.6% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.18

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.75%

Year 3 Revenue Growth8.82%

Year 5 Revenue Growth9.76%

Year 7 Revenue Growth6.75%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin16.25%

Terminal EBIT Margin19.13%

Tax Rate14.05%

Historical Capex / Rev2.70%

NWC / Revenue5.29%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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