(wow) Words Of Wonders Level 2967 Answers – On March 8, the management of General Electric (NYSE: GE) announced two major changes that investors should pay attention to. One of them is to increase the size of the board. Another important issue was the share purchase program. This may seem surprising to investors who have seen the company as a troubled company in recent years. But when you consider management's vision for the future, combined with the company's strong fundamentals today, this move makes sense. This is even more so if you clearly consider the price of the product at this time.
According to a report with the Organization for Economic Co-operation and Development, General Electric has announced two changes in its operations. The first was the decision to double the size of the court. The company has already nominated three candidates for the position, a gap caused by the current board member's decision not to seek re-election. These actions do not necessarily determine the future of the company. However, it is important for investors to monitor changes within the company.
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The most interesting part of this change is the company's decision to implement a $3 billion share buyback plan. This is a huge investment for the company, representing about 3.1% of the company's $96.91 billion market capitalization. Some traders may think that the wiser course of action is for the company to allocate these funds for dividends. But considering the stock is up 3.4% from its 52-week low and down 24.1% from its 52-week high, it's not hard to imagine why management made this decision.
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Over the past few years, General Electric has struggled in many ways. Initially, it started with weak performance in several sectors, the most striking example was its strong sector, where low demand and weak performance led to the loss of assets . Factors beyond the company's control, such as significant insurance premiums that it must cover, and factors beyond its control, such as the formation and vulnerability of Boeing ( BA ) Max line. With the airline market reeling from the COVID-19 pandemic, the company's woes seemed endless.
As I wrote earlier, management tried to reduce costs. Not only that, many issues affecting it have been resolved and the company has paid off its major debts. The company has reduced debt and other similar liabilities by a total of $80 billion since 2018, largely due to asset sales. Other business activities are also showing signs of life. For example, in fiscal 2022, management expects free cash flow generated by the company's aviation division to decrease slightly compared to the $4.3 billion generated in 2021. This compares to cash flow in the section. 2020. Meanwhile, the company's electricity segment should be slightly lower than the $0.9 billion it generated last year, and its 2020 cash flow should rise from its level of neutrality. Another good thing for the company is that the backlog is increasing. It reached $239.82 billion last year after falling from $245.433 billion in 2019 to $230.6 billion in 2020. This shows that long-term demand for its products is also increasing.
It is true that some investors may argue that the administration should still focus on reducing or increasing debt. I want to focus on the latter. But when it comes to debt, the picture is solid and improving. Today's cash and cash equivalents, including the company's shares in AerCap Holdings ( AER ) and Baker Hughes ( BKR ), should be approximately $ 26.99 billion. At the end of the 2021 financial year, the total debt will be $ 35.19 billion, without the $ 5.94 billion of capital that the company has included in the common debt category. That means the company has just $8.2 billion in total assets. Last year, the company generated $7.62 billion in EBITDA. But it is also complex, and as the figures above and below show, it should really be considered a form of debt because of the significant changes in the distribution of the company's assets and other liabilities, which such as insurance funds. But after the management's strong measures, the company's average ratio may reach 3.3 in 2021 and drop to 2 by the end of the year. With other changes, such as late tax payments for insurance savings that don't expire until at least 2030, that number rises to 5.4. However, given how extensive some of these loans are, investors can now download.
Not only is the company's balance sheet strong, but management is optimistic about the future picture. In fiscal 2022, management expects industry free cash flow to range from $5.5 billion to $6.5 billion. On average, this equates to more than 16.2 percent of free cash flow. The company expects to generate more than $5.1 billion in cash flow in 2021. Of course, investors should pay attention to the non-GAAP metrics because they look good. The company's net operating income in 2021, excluding cash flows and discontinued operations, was $888 million. If we do not include changes in the capital equation, it is $ 1.79 billion. However, the picture is complicated by the various changes that the company must take into account. That's why this non-GAAP number of $ 5.1 billion can be the best for shareholders when examined carefully. It's not clear what it's going to be like in 2022. We know that management was predicting the industry's free cash flow to grow to $7 billion in 2023. So I think that cash flow should be keep growing from here.
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Meanwhile, some investors may be scratching their heads when it comes to managers' share buying decisions. If the company ends up using this plan, it's not a bad idea. The price is above all and the company's bottom line is showing signs of improvement. In addition, the current strength of the company, and the implementation of the purchase strategy is not reasonable. Compared to the next investment in the business, it may be a little less. But the management teams of many companies often make additional decisions. So I don't see it as a bad thing for investors.
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Daniel is currently the CEO of Avaring Capital Advisors LLC, a hedge fund-managed investment advisor, and runs Crude Value Insights, a company that focuses on analyzing the cash flow and value of companies in the oil and gas industry. gas. Gas station. His main goal is to find businesses that trade with a strong focus on their core values, combining Benjamin Graham's investment philosophy with different market trends and their securities.
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Disclaimer: We do not have any equity, option or similar positions from any of the companies listed and we have no plans to initiate such positions in the next 72 hours. I wrote this article myself and it reflects my opinion. I will receive no compensation for this (other than Alpha Search). I have no business relationship with any company whose stock is mentioned in this article.
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