A strong performer from today's afternoon trading session is Eaton, whose shares rose 2.2% to $197.24 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Eaton's Valuation Is in Line With Its Sector Averages:
Eaton Corporation plc operates as a power management company worldwide. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Eaton has a trailing 12 month P/E ratio of 30.8 and a P/B ratio of 4.51.
Eaton's PEG ratio is 2.41, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Overview of the Company's Finances:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $21,390 | $17,858 | $19,628 | $20,752 |
| Gross Margins | 33.0% | 30.5% | 32.3% | 33.2% |
| Operating Margins | 13.4% | 10.2% | 12.6% | 14.4% |
| Net Margins | 10.34% | 7.9% | 10.92% | 11.86% |
| Net Income (MM) | $2,211 | $1,410 | $2,144 | $2,462 |
| Net Interest Expense (MM) | -236 | -149 | -144 | -144 |
| Net Interest Expense (MM) | -$236 | -$149 | -$144 | -$144 |
| Depreciation & Amort. (MM) | -$884 | -$811 | -$922 | -$954 |
| Earnings Per Share | $5.25 | $3.49 | $5.34 | $6.4 |
| EPS Growth | n/a | -33.52% | 53.01% | 19.85% |
| Diluted Shares (MM) | 421 | 404 | 402 | 399 |
| Free Cash Flow (MM) | $2,864 | $2,555 | $1,588 | $1,935 |
| Capital Expenditures (MM) | -$587 | -$389 | -$575 | -$598 |
| Net Current Assets (MM) | -$7,944 | -$7,673 | -$10,065 | -$9,193 |
| Current Ratio | 1.7 | 1.55 | 1.04 | 1.37 |
| Long Term Debt (MM) | $7,819 | $7,010 | $6,831 | $8,321 |
| Net Debt / EBITDA | 2.14 | 2.82 | 2.09 | 2.09 |
Eaton benefits from stable revenues and a flat capital expenditure trend, average operating margins with a stable trend, and positive EPS growth. The company's financial statements show consistent free cash flow and healthy leverage. However, the firm has slimmer gross margins than its peers. Finally, we note that Eaton has just enough current assets to cover current liabilities.
