Has the negative sentiment on GE gone too far?

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/06/has-the-negative-sentiment-on-ge-gone-too-far/

GE grew revenues from US$134.3 billion in 2004 to US$172.7 billion in 2007 – 8.75% compound annual growth rate. Our assumptions of revenues for the next three years are US$187.5 billion in 2008 growing to US$206.5 billion in 2010 – 6.1% compound annual growth rate. We have projected EBITDA margins increasing from 23.5% in 2008 to 24.5% in 2010.

We have used a terminal growth rate of 2.5%. We calculated this terminal growth rate based on year three growth (2009 to 2010) of 5% dropping to a 2% stable growth rate over the next ten years.

We have used a WACC (discount rate) of 6.5%. The WACC (discount rate) has a material impact on a discounted cash flow valuation (as does the terminal growth rate). We think this WACC of 6.5% is reasonable but recognise that the actual number could be as low as 5.5% or as high as 7.5-8%.

We used a terminal capital expenditure number of US$4.0 billion.

Analysis of GE's lending issues impact on the company

This is a great analysis of GE's issues with their substantial lending operations:

http://www.nytimes.com/2008/09/22/business/22ge.html?pagewanted=1&_r=1&ref=business

“With the tsunami sweeping over the financial sector, it is unrealistic to expect that G.E. will not get wet.”