It hasn't been a great year for investors in General Electric (NYSE: GE) or Honeywell International (NYSE: HON). The COVID-19 pandemic and the associated travel bans have caused a severe slump in the commercial aviation sector and that's bad news for businesses that have commercial aviation as their biggest single profit generator.
But investing in stocks is more about what will happen in the future, so let's take a look at which one of these industrial giants might be a better value right now.
Industrial conglomerates are traditionally valued on the basis of an earnings or free cash flow (FCF) multiple. The idea is that they should be diversified enough to generate earnings/FCF throughout an economic cycle, give or take some adjustment for the state of the economy. As a rough benchmark, a figure of 20 times FCF is probably a fair value for an industrial conglomerate. FCF is simply what's left over from operating cash after capital spending.
Source Fool.com