The Recent Drop of GE HealthCare Technologies Shares by 14%
GE HealthCare's Rollercoaster Q1 Performance
GE HealthCare, a third of the former General Electric, took a hit on Tuesday, losing 13.7% by 1:30 p.m. ET. The reason? A narrow earnings miss in their Q1 report.
Analysts had predicted the healthcare giant would post an adjusted earnings of $0.91 per share, with $4.8 billion in sales. But GE HealthCare reported a lower-than-expected profit of $0.90 per share, along with sales amounting to $4.6 billion.
The Breakdown of GE HealthCare's Q1 Results
The sales decline of 1% was a major disappointment for investors. GE HealthCare also shared that their book-to-bill ratio stood at just 1.03, suggesting potential stagnation in sales in the near future.
However, there was some good news - net profit margins improved by 10 basis points, and earnings went up by 6% on an adjusted basis. On a GAAP basis, the earnings even doubled, reaching $0.81 per share.
Is GE HealthCare Stock a Sell?
Management avoided providing a GAAP forecast for 2024 earnings, instead announcing that adjusted earnings would range between $4.20 to $4.35 per share. This translates to a 7% to 11% year-over-year growth.
At the midpoint of this range, GE HealthCare's stock would be valued at an 18 times P/E ratio and a 9% growth rate, resulting in a PEG ratio of 2. This, paired with the fact that GE HealthCare's stock price is now selling at a 22.5 times FCF ratio, indicates that the stock might be overvalued.
While management has forecasted faster sales and earnings growth as the year progresses, the current high valuation might deter investors.
In light of the aforementioned, it seems like the right decision for investors to consider selling GE HealthCare stock.
The company's financial struggles, as evident in the sales decline and the lack of a GAAP forecast for 2024 earnings, might push some investors to consider their options in terms of money management and investing strategies, potentially leading to the selling of GE HealthCare stock due to its potential overvaluation based on its high P/E and FCF ratios.
As GE HealthCare navigates finance challenges, successful investors might opt to allocate their money more strategically by looking for opportunities that offer better value and growth potential in the investing market.
