Recent interest in Eaton (ETN) has picked up as investors focus on expectations for higher year over year earnings and revenue this quarter, as well as its role in Europe’s growing supercapacitor market tied to the energy transition.
See our latest analysis for Eaton.
Eaton’s US$331.14 share price sits modestly above its year to date level, with recent one week gains and a 90 day share price return decline of 11.83% pointing to momentum that has cooled after a strong three and five year total shareholder return of 119.45% and 186.01% respectively.
If Eaton’s role in the energy transition has caught your eye, this can be a good moment to widen your search and check out aerospace and defense stocks as another source of power and electrification opportunities.
So, with Eaton’s shares pausing after strong multi year returns and trading at US$331.14 against analyst targets of about US$397.79, are you looking at an undervalued power management leader, or a stock where future growth is already priced in?
With Eaton’s fair value estimate around US$404 versus the last close at US$331.14, the most followed narrative sees meaningful upside grounded in detailed earnings and margin expectations.
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.
Curious what kind of revenue, margin and earnings profile would need to play out to back that valuation, and how rich a future P/E that implies? The most followed narrative lays out a full earnings path, plus the profit margin lift and share count changes that have to line up to keep that fair value in play.
Result: Fair Value of $404 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, that upside view depends heavily on data center demand staying supportive, and on acquisitions like Boyd Thermal delivering the expected revenue and margin lift without integration hiccups.
Find out about the key risks to this Eaton narrative.
That 18% upside story rests on earnings and margin forecasts, but the current P/E of 32.8x paints a more cautious picture. It is slightly higher than the US Electrical industry at 32.3x, even though it sits well below peers at 46.7x and the fair ratio of 38.2x.
This mix of slightly expensive versus the sector, cheaper than peers, and below a fair ratio target suggests room for the market to move either way. Is Eaton priced for solid delivery, or are you already paying up for the data center and thermal growth story?
See what the numbers say about this price — find out in our valuation breakdown.
If your view on Eaton’s story differs, or you simply want to test your own assumptions against the numbers, you can build a custom narrative in just a few minutes with 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.
If Eaton is on your radar, do not stop there. A broader watchlist can help you spot opportunities you might otherwise miss.
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