Johnson Controls International (JCI) Is Up 2.58% Today - Is It Still an Opportunity?

Shares of Johnson Controls International (JCI) jumped 2.58 % during today's afternoon session, bringing their 52 week performance to 2.47%. Johnson Controls International plc is an Irish-domiciled multinational conglomerate headquartered in Cork, Ireland, that produces fire, HVAC, and security equipment for buildings. The large-cap Consumer Discretionary company is based in Cork, United States.

JCI Has a Higher P/E Ratio Than the Sector Average

Compared to the Consumer Discretionary sector's average of 22.33, Johnson Controls International has a trailing twelve month price to earnings (P/E) ratio of 35.08 and an expected P/E ratio of 15.45. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $1.77 or forward earnings per share of $4.02.

Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Johnson Controls International's P/E ratio is higher than its sector average of 22.33, we can deduce that the market is overvaluing the company's earnings.

Johnson Controls International Is Fairly Valued in Terms of Expected Growth

Another factor pointing to Johnson Controls International's value is its PEG ratio of 1.235. This is the stock's price to earnings ratio divided by its estimated earnings growth rate. If the resulting ratio is near or lower than 1 -- but higher than 0 -- its indicates that the company is faitly valued in terms of expected growth.

JCI Has an Average P/B Ratio

The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.

Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since Johnson Controls International's P/B ratio of 2.809 is slightly lower than its sector average of 3.12, some margin of safety may exist for the stock.

JCI Is Generating Cash

Johnson Controls International has decent free cash flows. This represents the actual cash that the company is generating from its sales revenues, minus its re-investments in the business (capital expenditures). The company's operating cash flows have an average growth rate of 21.23%, compared to -0.34% for capital expenditures. From the table below we can also see that the free cash flows has an average growth rate of 32.7% and a coefficient of variability of 48%:

Date Reported Cash Flow from Operations (k) Capital Expenditures (k) Free Cash Flow (k) YoY Growth
2022-09-30 $3,733,000 $592,000 $3,141,000 57.13%
2021-09-30 $2,551,000 $552,000 $1,999,000 -1.82%
2020-09-30 $2,479,000 $443,000 $2,036,000 75.97%
2019-09-30 $1,743,000 $586,000 $1,157,000 32.23%
2018-09-30 $1,520,000 $645,000 $875,000 n/a

Johnson Controls International Is Not a Profitable Business

If you are looking to make JCI a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and Johnson Controls International's management may be able to make the business profitable in the future.

Johnson Controls International's Gross Margins

Date Reported Revenue (k) Cost of Revenue (k) Gross Margin YoY Growth
2022-09-30 $25,213,000 $24,604,000 33.09% -1.93%
2021-09-30 $23,883,000 $21,642,000 33.74% 1.63%
2020-09-30 $22,321,000 $22,322,000 33.2% 2.63%
2019-09-30 $23,777,000 $23,366,000 32.35% 31.24%
2018-09-30 $31,099,000 $28,719,000 24.65% n/a

Johnson Controls International's Operating Margins

Date Reported Revenue (k) Operating Expenses (k) Operating Margin YoY Growth
2022-09-30 $25,213,000 $7,886,000 1.81% -76.34%
2021-09-30 $23,883,000 $6,232,000 7.65% 905.26%
2020-09-30 $22,321,000 $7,622,000 -0.95% -162.91%
2019-09-30 $23,777,000 $7,333,000 1.51% -80.36%
2018-09-30 $31,099,000 $6,875,000 7.69% n/a

Johnson Controls International's cost of revenue is growing at a rate of -2% in contrast to 3.78% for operating expenses. Sales revenues, on the other hand, have experienced a -3.42% growth rate. As a result, the average gross margins growth is 6.71 and the average operating margins growth rate is 117.13, with coefficients of variability of 12% and 111% respectively.

Johnson Controls International Benefits From Positive Market Signals

The market sentiment regarding Johnson Controls International is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $81.0 to $58.0. JCI is trading -13.76% away from its target price of $72.0. 1% of the company's shares are tied to short positions, and 93% of the shares are held by institutional investors.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.