Financial Review: Philips (PHG) versus General Electric (GE)

General Electric (NYSE: GE) and Philips (NYSE:PHG) are both large-cap multi-sector conglomerates companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, analyst recommendations, valuation, institutional ownership, dividends and profitability.

Analyst Ratings

This is a breakdown of recent recommendations for General Electric and Philips, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
General Electric 5 12 4 0 1.95
Philips 0 3 4 0 2.57

General Electric presently has a consensus price target of $17.59, suggesting a potential upside of 25.22%. Philips has a consensus price target of $37.00, suggesting a potential downside of 12.41%. Given General Electric’s higher possible upside, equities analysts plainly believe General Electric is more favorable than Philips.

Dividends

General Electric pays an annual dividend of $0.48 per share and has a dividend yield of 3.4%. Philips pays an annual dividend of $0.73 per share and has a dividend yield of 1.7%. General Electric pays out 45.7% of its earnings in the form of a dividend. Philips pays out 58.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. General Electric is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

General Electric has a beta of 1.02, suggesting that its stock price is 2% more volatile than the S&P 500. Comparatively, Philips has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500.

Profitability

This table compares General Electric and Philips’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
General Electric -6.16% 11.22% 2.48%
Philips 8.76% 7.08% 3.21%

Insider and Institutional Ownership

56.1% of General Electric shares are held by institutional investors. Comparatively, 6.8% of Philips shares are held by institutional investors. 1.1% of General Electric shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares General Electric and Philips’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
General Electric $122.09 billion 1.00 -$5.79 billion $1.05 13.38
Philips $20.08 billion 1.95 $1.87 billion $1.24 34.06

Philips has lower revenue, but higher earnings than General Electric. General Electric is trading at a lower price-to-earnings ratio than Philips, indicating that it is currently the more affordable of the two stocks.

Summary

Philips beats General Electric on 8 of the 15 factors compared between the two stocks.

General Electric Company Profile

General Electric Company operates as a digital industrial company worldwide. It operates through Power, Renewable Energy, Oil & Gas, Aviation, Healthcare, Transportation, Lighting, and Capital segments. The Power segment offers technologies, solutions, and services related to energy production, including gas and steam turbines, engines, generators, and high voltage equipment; and power generation services and digital solutions. The Renewable Energy segment provides wind turbine platforms, and hardware and software; offshore wind turbines; solutions, products, and services to hydropower industry; and blades for onshore and offshore wind turbines. The Oil & Gas segment offers oilfield services, oilfield equipment, turbomachinery and process solutions, and digital solutions. The Aviation segment provides jet engines and turboprops; maintenance, component repair, and overhaul services, as well as replacement parts; and additive machines, materials, and engineering services. The Healthcare segment offers diagnostic imaging and clinical systems; products, services, and manufacturing solutions for drug discovery, the biopharmaceutical industry, and cellular and gene therapy technologies; and medical technologies, software, analytics, cloud solutions, and implementation and services. The Transportation segment provides freight and passenger locomotives, and rail and support advisory services; parts, integrated software solutions, and data analytics; software-enabled solutions; mining equipment and services; and marine diesel and stationary power diesel engines and motors, as well as overhaul, repair and upgrade, and wreck repair services. The Lighting segment offers light emitting diode products; and energy efficiency and productivity solutions. The Capital segment provides industrial and energy financial services; and commercial aircraft leasing, financing, and consulting services. General Electric Company was founded in 1892 and is headquartered in Boston, Massachusetts.

Philips Company Profile

Koninklijke Philips N.V. operates as a health technology company worldwide. It operates through Personal Health, Diagnosis & Treatment, Connected Care & Health Informatics, and HealthTech Other segments. The company offers mother and child care, and oral healthcare products; male grooming and beauty products; kitchen appliance, coffee, air, garment care, and floor care products; and sleep, respiratory care, and respiratory drug delivery products. It also provides diagnostic x-ray, integrated clinical, magnetic resonance imaging, computed tomography, and molecular imaging solutions. In addition, the company offers interventional x-ray systems, and imaging and therapy devices for coronary artery and peripheral vascular disease; imaging products; guidance for cardiology, general imaging, obstetrics/gynecology, and point-of-care applications; and proprietary software to enable diagnostics and intervention. Further, it provides enterprise wide patient monitoring solutions; patient analytics and monitoring, and clinical decision support systems; therapeutic care products; patient monitoring and therapeutic care consumables; and customer services. Additionally, the company offers healthcare information technology (IT), clinical, and visualization and quantification informatics solutions for radiology, cardiology, and oncology departments; universal data management solutions, picture archiving and communication systems, and integrated electronic medical record systems; clinical and hospital IT platforms; technology-enabled monitoring and intervention, actionable program, cloud-based, and population health management software solutions. It also provides HealthSuite Cloud, Premise, Insights, Consumer Engagement, and Clinical platforms. The company was formerly known as Koninklijke Philips Electronics N.V. and changed its name to Koninklijke Philips N.V. in May 2013. Koninklijke Philips N.V. was founded in 1891 and is headquartered in Amsterdam, the Netherlands.

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