The Motley Fool Take
Not all that long ago, General Electric (NYSE: GE) was a mega-conglomerate with its hands in a wide variety of businesses. Not anymore. GE has since sold or spun off a number of businesses (such as its financial units and NBC) and has returned to its industrial roots — but with a twist. Instead of just being a traditional manufacturer, GE is becoming a “digital industrial company,” combining its software and manufacturing expertise to create next-generation products.
Those offerings include gas turbines, jet engines, light bulbs, locomotives and other industrial products that connect to the internet. When combined with a subscription to GE’s Predix software, these new products will be able to run more efficiently and communicate potential maintenance issues, both of which can greatly lower operating costs.
That should allow GE to steadily steal market share and substantially grow revenue in its high-margin software division. If this works out as planned, GE’s bottom line looks well positioned for growth in the years ahead.
Market watchers believe that GE’s bottom line will grow by more than 12 percent annually over the next five years. That’s fast for a company recently trading at a forward-looking price-to-earnings (P/E) ratio in the teens. Throw in a dividend that recently yielded 3.2 percent, and GE looks like a stock patient investors can learn to love. (The Motley Fool owns shares of General Electric.) ¦