GE - How GE's Power and Renewables Businesses Are Both an Opportunity and a Curse
Sometimes, General Electric's (NYSE: GE) power and renewable energy businesses are seen as millstones around the neck of the company. However, they could also be seen as a value investing opportunity. Here's how and why investors shouldn't be too quick to dismiss the potential in both segments.
Value investors come in all shapes and sizes, but one type of value investor likes to look at a business and compare its earnings and/or free cash flow margin to its peers and invest on the basis that the troubled company has an opportunity to raise its margin vs. its peers. That's precisely the argument that investors could make about GE's power and renewable energy businesses right now because both segments are behind their peers in terms of margin.
That point will be returned to in a moment, but in order to build a case for improvement, it's a good idea to look into what went wrong and why GE's businesses have been underperforming peers like Vestas (OTC: VWDRY), Siemens Gamesa (OTC: GCTAF) in renewable energy, and Siemens (OTC: SIEGY) in power.