Eaton (ETN) just released its third quarter earnings, showing year-over-year gains in both sales and net income. The company also provided upbeat guidance for the fourth quarter and full year, which signals continued growth momentum.
See our latest analysis for Eaton.
Eaton’s upbeat quarterly results and confident guidance have certainly kept investor optimism alive, with the stock price gaining 13.78% year-to-date and reaching $377.72. Over the past year, shareholders have enjoyed a total return of 13.05%, and long-term holders have been well rewarded with a 256.86% total return over five years. This underscores steady momentum that shows little sign of fading.
If you’re keen to widen your search beyond a single name, now’s a great time to discover fast growing stocks with high insider ownership.
With shares sitting just below analyst price targets and the company delivering strong guidance, investors must now ask whether Eaton’s current valuation leaves any room for upside or if the market has already factored in the future growth story.
With share price recently closing at $377.72 and the most popular narrative placing fair value at $404.21, there could be more runway ahead. This narrative sets its sights higher than the current market, setting up an intriguing debate about Eaton’s true worth.
Strategic wins and technology leadership in the rapidly expanding data center end market are deepening Eaton’s penetration and raising content per megawatt, with major partnerships (e.g., NVIDIA, Siemens Energy) and acquisitions (Fibrebond, Resilient Power) positioning Eaton as the go-to provider for next-generation high-density and AI-centric infrastructure. This supports outsized revenue growth and structurally higher margins due to a richer, more sophisticated product mix.
Want to see what powers this bullish outlook? There’s a bold financial play at the heart of the valuation, built on major growth assumptions and a future profit multiple reminiscent of the market’s most in-demand names. The engine behind the numbers might surprise you. Click in to discover the core assumptions fueling this fair value call.
Result: Fair Value of $404.21 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, sustained weakness in Eaton’s vehicle segment or delayed benefits from recent investments could present challenges to the upbeat growth narrative ahead.
Find out about the key risks to this Eaton narrative.
While the most popular narrative points to undervaluation, our DCF model tells a different story, suggesting Eaton’s shares are trading well above its estimated fair value. This model paints a picture of an overvalued stock, which stands in sharp contrast to the upbeat outlook. Could the market be pricing in too much?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Eaton for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 840 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
If you want to dig into the numbers, question the outlook, or run your own scenario, creating a custom narrative is quick and easy. You can get started in just a few minutes. Do it your way
A great starting point for your Eaton research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
Unlock your next big win by heading into the Simply Wall St Screener, where powerful opportunities are waiting for investors who go beyond the obvious choices.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ETN.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com