Eaton (ETN) has quietly pulled back about 12% over the past month, even as its long term returns remain strong. That combination of recent weakness and multi year strength sets up an interesting discussion about potential entry points.
See our latest analysis for Eaton.
The recent 12.4% one month share price pullback sits in sharp contrast to Eaton’s powerful three and five year total shareholder returns. This suggests that momentum is cooling for now rather than reversing the longer term growth story.
If Eaton’s reset has you thinking more broadly about industrial opportunities, this could be a good moment to explore aerospace and defense stocks for other potential compounders.
With shares still up strongly over three and five years but down double digits recently, is Eaton now trading below its true power management potential, or has the market already priced in the next leg of earnings growth?
Eaton’s most followed narrative pegs fair value around $410 per share versus the last close near $338, setting up a sizable upside gap to explore.
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 how fast revenue, earnings, and margins must scale to back that higher price tag, and what multiple the narrative is quietly baking in? Dig into the full narrative and unpack the assumptions driving this fair value call.
Result: Fair Value of $410.77 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, heavy data center reliance and execution risk on large acquisitions mean any slowdown or integration stumble could quickly challenge today’s upbeat valuation story.
Find out about the key risks to this Eaton narrative.
Our earnings based lens tells a cooler story. Eaton trades on a 33.4x price to earnings ratio, slightly richer than the US Electrical industry at 31.3x, yet cheaper than peers at 46.8x and a fair ratio of 37.9x. This raises the question: is this a reasonable premium or a hidden discount?
See what the numbers say about this price — find out in our valuation breakdown.
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 906 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 see the story differently or want to stress test the numbers yourself, you can craft a personalized view in just a few minutes: Do it your way.
A great starting point for your Eaton research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
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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.
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