Why GE Aerospace’s Massive $210 Billion Backlog Doesn’t Justify Its Current Valuation

Key Highlights

• GE Aerospace has seen its share price surge approximately 300% over the last three years.

• The company maintains a formidable $210 billion backlog, signaling strong future revenue.

• Wall Street has reacted enthusiastically to the company’s recent operational successes.

Benjamin Graham, the mentor to Warren Buffett, famously distinguished between a great company and a great investment. He argued that even an exceptional business can become a poor investment if the entry price is too high. This is precisely how I view GE Aerospace (NYSE: GE) today. While the company’s business fundamentals are impressive, the current stock price makes it an unattractive purchase for me.

A Robust Outlook Driven by Massive Backlogs

The most striking metric for GE Aerospace is its $210 billion backlog. This figure represents a massive reservoir of guaranteed future income, consisting of both direct product sales and long-term service contracts.

Image source: Getty Images.

The company’s jet engines are high-value assets that are typically ordered years in advance. Furthermore, every engine sold creates a recurring, annuity-like revenue stream through essential parts and maintenance services. This creates a virtuous cycle where every new sale bolsters the long-term service business. The company’s trajectory is undeniably positive; in the second quarter of 2026, adjusted revenues grew by 24% year-over-year, while earnings climbed by 22%.

My critique has nothing to do with the quality of the business, but rather with its current valuation.

The Valuation Concerns

As an investor with a focus on value and income, GE Aerospace’s current metrics are difficult to reconcile. From an income perspective, the dividend yield is a mere 0.5%, which is significantly lower than the S&P 500 index‘s (SNPINDEX: ^GSPC) yield of approximately 1%. For those seeking income, a yield closer to 4% is generally preferred.

While GE Aerospace’s historical valuation data is somewhat skewed by General Electric’s massive restructuring and subsequent spin-offs, the current multiples appear stretched. The price-to-sales ratio stands at 7.2x, far exceeding its five-year average of 2.1x. The price-to-earnings ratio is 41x, compared to a five-year average of roughly 30x. Additionally, the price-to-book ratio is 20.5x, a sharp departure from its five-year average of 4.5x. While these variables are complex, the consensus is clear: GE Aerospace is no longer cheap.

The 300% price appreciation over the last three years reflects investor optimism regarding the GE overhaul. However, compared to the S&P 500’s average P/E of 27.5x and P/B of 5.4x, it is evident that the market is pricing in a perfect scenario for GE Aerospace, leaving little room for error.

A Strong Company with High Expectations

GE Aerospace deserves immense credit for its operational excellence. However, because the market is already well aware of this success, the current stock price essentially assumes continued perfection. While the massive backlog supports a positive outlook, I believe the valuation has already accounted for much of the upcoming good news. For now, I prefer to keep this stock on my watchlist rather than making a purchase.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Aerospace. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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