GE Aerospace has a Backlog Worth $210 Billion. Here's Why I'm Still Not Buying

Benjamin Graham, who helped train Warren Buffett, often talked about the difference between a company and a stock. Graham had a saying that, to paraphrase, even a good company can be a bad investment if you pay too much for it. That's the lens through which I view GE Aerospace (NYSE: GE) today. Here's why I wouldn't buy the stock, despite the company's business success.

The future is right in front of you

The big number for GE Aerospace is its $210 billion backlog. That's a massive number, representing the future income the company already has lined up. Adding to the allure of that figure is that it comprises two income streams: product sales and services.

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The aerospace company's jet engines are expensive and are ordered years in advance. But each jet engine sold must be maintained, generating an annuity-like parts-and-services income stream for GE Aerospace. And each new engine sold just adds to the parts-and-services business. There's no question that GE Aerospace has a bright future ahead. And it is doing very well already, with adjusted revenues up 24% year over year in the second quarter of 2026, and earnings up 22%.

I don't have any problem with the business. My issue with GE Aerospace is the valuation.

GE Aerospace looks expensive to me

I have an income focus and a value bias. Starting with the income side of the equation, GE Aerospace's dividend yield is a miserly 0.5%. That's even lower than the S&P 500 index's (SNPINDEX: ^GSPC) 1% yield. Like many dividend investors, I prefer yields in the 4% area, though I'll make exceptions for stocks that look cheap relative to their own histories.

GE Aerospace's history is a bit complex, as you might expect given General Electric's massive restructuring. Essentially, GE Aerospace is what was left after a series of asset sales and spin-offs. Still, the stock's price-to-sales ratio is 7.2x compared to a five-year average of 2.1x. Its price-to-earnings ratio is 41x compared to a five-year average of around 30x. And its price-to-book value ratio is 20.5x compared to a five-year average of 4.5x. There are a lot of moving parts, but it is pretty apparent that GE Aerospace isn't cheap.

The nearly 300% price advance over the past three years has something to do with that, of course. Investors have clearly been pleased with the GE overhaul and GE Aerospace's business performance. However, with the S&P 500's average P/E ratio at 27.5x and its average P/B ratio at 5.4x, it is also very clear that investors are pricing in a lot of good news for GE Aerospace relative to its recent past and the broader market.

Not a bad company, but Wall Street sees only blue skies ahead

GE Aerospace deserves a lot of credit; it is performing very well as a business. However, investors know it and are pricing in continued strong performance. That could very well be the outcome, given the huge backlog. However, I think the valuation prices in the good news and more. This is a stock I would keep on my watch list for now.

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.