With Strong Cash Flow, GE HealthCare Technologies Stock Poised to Rise?
GE HealthCare Technologies (GEHC) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market
GEHC Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 5.4%, but GE HealthCare Technologies stock does
- Strong Margin: Last 12 month operating margin of 12.6%
- Growth: Last 12 revenue growth of 6.0% – low growth, but this selection is all about high yield and margin
- Valuation: GEHC stock currently trading at 34% below 2Y high, 18% below 1M high, and at a PS lower than 3Y average.
Below is a quick comparison of GEHC fundamentals with S&P medians.
| GEHC | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Health Care Equipment | – |
| Free Cash Flow Yield | 5.4% | 4.3% |
| Revenue Growth LTM | 6.0% | 7.3% |
| Revenue Growth 3YAVG | 3.9% | 5.6% |
| Operating Margin LTM | 12.6% | 18.4% |
| Operating Margin 3YAVG | 12.9% | 18.3% |
| PE Ratio | 14.6 | 23.7 |
*LTM: Last Twelve Months
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But What Is The Risk Involved?
While GEHC stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. GEHC tumbled 55% during the Dot-Com crash, slid 48% in the Global Financial Crisis, and dropped 50% amid the 2022 inflation squeeze. Even the less severe pullbacks like 2018 and Covid caused losses north of 20%. Solid fundamentals matter, but downturns hit deep, reminding you that no stock is a safe haven when volatility spikes. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read GEHC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Stocks Like GEHC
Not ready to act on GEHC? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few year average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Strategy consistent across market cycles
Portfolios Are The Smarter Way To Invest
Individual stocks can soar or tank, but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside, and mitigate the downside associated with any individual stock.
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