Quick Report on Eaton (ETN)

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.

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.