GE Aerospace (NYSE: GE) trades at 33.6 times Wall Street estimates for 2025 earnings. That valuation might seem excessive, but it's crucial to note GE delivers an essential product (commercial airplane engines are its most important revenue generator) in a business with incredibly high barriers to entry, and GE is the leading player in it.

Here's why the stock deserves a premium rating.

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A long tail of earnings in place

Selling airplane engines isn't really a profitable business, as engines are typically sold at a loss. The major commercial engine manufacturers, such as GE Aerospace, RTX, and Rolls-Royce, make their money through the long-term stream of higher-margin aftermarket/services revenue generated on long-term contracts. Given that airplane engines can be utilized for over 40 years, it's clear GE will generate a long tail of earnings and cash flow for every engine sold or already installed in the global airline fleet.

GE and its joint venture, CFM International, dominate the market. For example, in the narrowbody market, CFM's LEAP engine is the sole engine option for the Boeing 737 MAX and the Comac C919, and it is one of two options for the Airbus A320-neo family. Meanwhile, in the widebody market, GE's GEnx is one of two options on the Boeing 787 and the sole option for the 777X, and GE's CF6 powers the Airbus A330.

Such dominant market positioning ensures GE continues to generate robust equipment and service orders -- the key to its long-term growth prospects.

Order growth in a challenging year

GE's excellent order growth needs to be considered in the context of a challenging year for engine deliveries and one in which Boeing and Airbus have scaled back airplane production plans. Equipment order growth continues its excellent growth trajectory despite the difficulties in delivering engines. Meanwhile, service orders continue to grow as older planes are run more.

These facts highlight the strength of GE's market position, business moat, and long-term growth prospects. That's why the stock deserves a premium rating.

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