We've been asking ourselves recently if the market has placed a fair valuation on Emerson Electric Company. Let's dive into some of the fundamental values of this large-cap Technology company to determine if there might be an opportunity here for value-minded investors.
Emerson Electric Company's Valuation Is in Line With Its Sector Averages:
Emerson Electric Co., a technology and software 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 23.7 and a P/B ratio of 2.44.
Emerson Electric Company's PEG ratio is 1.58, 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.
