It hasn't been a great evening session for Emerson Electric Company investors, who have watched their shares sink by -7.4% to a price of $84.94. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Emerson Electric Company Is Potentially Undervalued and Trades Below Its Graham Number:
Emerson Electric Co., a technology and engineering company, provides various solutions for customers in industrial, commercial, and consumer markets in the Americas, Asia, the Middle East, Africa, and Europe. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, Emerson Electric Company has a trailing 12 month P/E ratio of 15.2 and a P/B ratio of 2.37.
Emerson Electric Company's PEG ratio is 1.33, 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.
Low Leverage Levels and Exceptional EPS Growth:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $17,408 | $18,372 | $16,785 | $18,236 | $19,629 | $16,435 |
| Operating Margins | 15.0% | 16.0% | 14.0% | 16.0% | 21.0% | 28.0% |
| Net Margins | 13.0% | 13.0% | 12.0% | 13.0% | 16.0% | 80.0% |
| Net Income (MM) | $2,224 | $2,328 | $1,990 | $2,327 | $3,231 | $13,215 |
| Net Interest Expense (MM) | -$159 | -$174 | -$156 | -$154 | -$193 | -$155 |
| Depreciation & Amort. (MM) | $758 | $822 | $854 | $969 | $1,039 | $1,166 |
| Earnings Per Share | $3.46 | $3.71 | $3.24 | $3.82 | $5.41 | $22.87 |
| Diluted Shares (MM) | 635 | 621 | 607 | 602 | 596 | 551 |
| Free Cash Flow (MM) | $2,275 | $2,412 | $2,545 | $2,994 | $2,391 | $1,971 |
| Capital Expenditures (MM) | $617 | $594 | $538 | $581 | $531 | $526 |
| Net Current Assets (MM) | -$2,522 | -$803 | $303 | $4,643 | -$2,866 | $4,982 |
| Long Term Debt (MM) | $2,641 | $4,018 | $5,892 | $8,722 | $8,159 | $7,642 |
| Net Debt / EBITDA | 1.38 | 1.19 | 1.7 | 1.04 | 1.5 | -0.29 |
Emerson Electric Company has exceptional EPS growth, low leverage, and decent operating margins with a positive growth rate. Furthermore, Emerson Electric Company has weak revenue growth and a flat capital expenditure trend and irregular cash flows.
