Stock Analysis on Net
Stock Analysis on Net

GE Aerospace (NYSE:GE)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

GE Aerospace, free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 21.24%
01 FCFF0 8,151
1 FCFF1 8,255 = 8,151 × (1 + 1.28%) 6,809
2 FCFF2 8,715 = 8,255 × (1 + 5.58%) 5,929
3 FCFF3 9,577 = 8,715 × (1 + 9.88%) 5,374
4 FCFF4 10,936 = 9,577 × (1 + 14.19%) 5,061
5 FCFF5 12,958 = 10,936 × (1 + 18.49%) 4,947
5 Terminal value (TV5) 558,901 = 12,958 × (1 + 18.49%) ÷ (21.24% – 18.49%) 213,355
Intrinsic value of GE Aerospace capital 241,474
Less: Preferred stock (fair value) 0
Less: Borrowings (fair value) 20,558
Intrinsic value of GE Aerospace common stock 220,916
 
Intrinsic value of GE Aerospace common stock (per share) $212.92
Current share price $319.01

Based on: 10-K (reporting date: 2025-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

GE Aerospace, cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 330,993 0.94 22.34%
Preferred stock (fair value) 0 0.00 0.00%
Borrowings (fair value) 20,558 0.06 3.57% = 4.03% × (1 – 11.48%)

Based on: 10-K (reporting date: 2025-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,037,562,513 × $319.01
= $330,992,817,272.13

   Borrowings (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (14.10% + 12.60% + 11.40% + 33.70% + 7.80%) ÷ 5
= 11.48%

WACC = 21.24%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

GE Aerospace, PRAT model

Microsoft Excel
Average Dec 31, 2025 Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021
Selected Financial Data (US$ in millions)
Interest and other financial charges 843 986 1,118 1,607 1,876
Income (loss) from discontinued operations, net of taxes 103 (91) 414 (644) (3,195)
Net income (loss) attributable to the Company 8,704 6,556 9,481 225 (6,520)
 
Effective income tax rate (EITR)1 14.10% 12.60% 11.40% 33.70% 7.80%
 
Interest and other financial charges, after tax2 724 862 991 1,065 1,730
Add: Preferred stock dividends — — 295 289 237
Add: Dividends and other transactions with shareholders 1,529 12,599 5,642 353 380
Interest expense (after tax) and dividends 2,253 13,461 6,928 1,707 2,347
 
EBIT(1 – EITR)3 9,325 7,509 10,058 1,934 (1,595)
 
Short-term borrowings 1,686 2,039 1,253 3,757 4,361
Long-term borrowings 18,808 17,234 19,711 28,593 30,824
Shareholders’ equity 18,677 19,342 27,378 36,366 40,310
Total capital 39,171 38,615 48,342 68,716 75,495
Financial Ratios
Retention rate (RR)4 0.76 -0.79 0.31 0.12 —
Return on invested capital (ROIC)5 23.81% 19.45% 20.80% 2.82% -2.11%
Averages
RR 0.10
ROIC 12.95%
 
FCFF growth rate (g)6 1.28%

Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).

1 See details »

2025 Calculations

2 Interest and other financial charges, after tax = Interest and other financial charges × (1 – EITR)
= 843 × (1 – 14.10%)
= 724

3 EBIT(1 – EITR) = Net income (loss) attributable to the Company – Income (loss) from discontinued operations, net of taxes + Interest and other financial charges, after tax
= 8,704 – 103 + 724
= 9,325

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [9,325 – 2,253] ÷ 9,325
= 0.76

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 9,325 ÷ 39,171
= 23.81%

6 g = RR × ROIC
= 0.10 × 12.95%
= 1.28%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (351,551 × 21.24% – 8,151) ÷ (351,551 + 8,151)
= 18.49%

where:

Total capital, fair value0 = current fair value of GE Aerospace debt and equity (US$ in millions)
FCFF0 = the last year GE Aerospace free cash flow to the firm (US$ in millions)
WACC = weighted average cost of GE Aerospace capital

FCFF growth rate (g) forecast

GE Aerospace, H-model

Microsoft Excel
Year Value gt
1 g1 1.28%
2 g2 5.58%
3 g3 9.88%
4 g4 14.19%
5 and thereafter g5 18.49%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 1.28% + (18.49% – 1.28%) × (2 – 1) ÷ (5 – 1)
= 5.58%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 1.28% + (18.49% – 1.28%) × (3 – 1) ÷ (5 – 1)
= 9.88%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 1.28% + (18.49% – 1.28%) × (4 – 1) ÷ (5 – 1)
= 14.19%