Short Report on Rockwell Automation Stock

Rockwell Automation logged a -0.3% change during today's morning session, and is now trading at a price of $273.99 per share.

Rockwell Automation shares moved 7.1% over the last 52 weeks, with a high of $309.36 and a low of $190.08. During this time, the stock outperformed the S&P 500 index by 10.0%. As of January 2022, the company's 50-day average price is $286.0. Rockwell Automation, Inc. provides industrial automation and digital transformation solutions in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The large-cap Industrials company has 26,000 full time employees and is based in Milwaukee, WI. Rockwell Automation has returned a 1.7% dividend yield over the last 12 months.

Snapshot of the Company's Consistent Operating Margins:

2019-09-30 2020-09-30 2021-09-30 2022-09-30
Revenue (MM) $6,695 $6,330 $6,997 $7,760
Revenue Growth n/a -5.45% 10.55% 10.9%
Gross Margins 43.3% 41.0% 41.4% 40.0%
Gross Margins Growth n/a -5.31% 0.98% -3.38%
Operating Margins 20.3% 17.6% 17.4% 17.2%
Operating Margins Growth n/a -13.3% -1.14% -1.15%
Net Margins 10.39% 16.16% 19.41% 11.84%
Net Margins Growth n/a 55.53% 20.11% -39.0%
Earnings Per Share $5.83 $8.77 $11.58 $9.24
EPS Growth n/a 50.43% 32.04% -20.21%
Diluted Shares (MM) 119 117 117 115
Free Cash Flow (MM) $1,049 $1,007 $1,141 $682
FCF Growth n/a -4.06% 13.32% -40.21%
Capital Expenditures (MM) -$133 -$114 -$120 -$141
Net Debt / EBITDA 1.08 0.92 1.82 2.33

Rockwell Automation Is Overpriced:

Compared to the Industrials sector's average of 20.49, Rockwell Automation has a trailing twelve month P/E ratio of 29.7 and, according to its EPS guidance of 12.36, an expected P/E ratio of 22.2. Rockwell Automation's PEG ratio is 1.91 based on its 16.2% compound average growth rate of historical and projected earnings per share. However, we believe that it is more prudent to calculate the PEG ratio using the broader market's 5-year expected EPS growth rate of 9.8%, because the growth rate implied by Rockwell Automation's past and expected EPS is probably not sustainable. This more prudent approach shows a PEG ratio of 3.16, which suggests that the company's shares are actually overvalued.

Rockwell Automation's P/B ratio is 10.8 compared to its sector average of 3.78. The company is likely overvalued in terms of its net asset value. The company's shares are currently trading 285.1% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 4-year average EPS * book value per share) = √(22.5 * 8.86 * 25.394) = $71.15

Rockwell Automation Is the Subject of Mixed Market Indicators:

21 analysts are following Rockwell Automation and have set target prices ranging from $220.0 to $335.0 per share. On average, they have given the company a rating of hold. At the current price of $273.99, ROK is trading -2.74% away from its average analyst target price of $281.71 per share, implying an analyst consensus of some upside potential for the stock.

The company has an average amount of shares sold short since 3.1% of the company's shares are tied to short positions. Institutions own 83.0% of Rockwell Automation's shares, while the insider ownership rate stands at 0.16%. The biggest shareholder is the Vanguard Group, Inc. with a 12% stake in the company worth approximately $3,725,137,494.

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.