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Eaton (ETN) has caught investor attention after a solid recent run, with the share price up about 2% in the past day, 6% over the past week and roughly 10% over the past month.
See our latest analysis for Eaton.
Looking beyond the latest moves, Eaton’s recent gains come after a 90 day share price return of about a 7% decline, while its 1 year total shareholder return of 9.73% and 3 year total shareholder return of 128.42% point to strong longer term momentum.
If Eaton’s recent run has you thinking about what else is moving, it could be a useful moment to broaden your search with aerospace and defense stocks.
With Eaton showing recent share price strength, growing revenue and net income, yet trading about 12% below the average analyst price target, an important question arises: is there still upside here, or is the market already pricing in future growth?
Compared to Eaton’s last close at $354.37, the most followed narrative places fair value nearer $404, based on detailed long term earnings and cash flow assumptions.
Early but significant revenue traction in Asia-Pacific and the start of a data center buildout cycle in Europe, combined with a ramp in high-growth franchises like Aerospace (now benefiting from defense tailwinds and synergistic acquisitions), is expanding Eaton’s geographic mix and revenue base, further reducing risk and boosting both top-line and net margin prospects over the long term.
Want to see what supports that higher fair value? The narrative leans on measured revenue growth, wider margins and a richer earnings multiple tied to those forecasts. The exact mix of assumptions may surprise you.
Result: Fair Value of $404.06 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, you still need to watch for weaker Vehicle and eMobility demand, as well as the heavy spending on capacity and acquisitions that could pressure margins if execution slips.
Find out about the key risks to this Eaton narrative.
There is also our DCF model, which looks at Eaton through estimated future cash flows rather than earnings multiples. On that measure, Eaton’s fair value comes out at about $224 per share, so the current $354 price screens as overvalued rather than undervalued. Which story do you trust more: the cash flows or the earnings narrative?
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 866 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 are not on board with these views, or simply prefer to test the assumptions yourself, you can pull up the same data, adjust the inputs to match your own outlook, and build a custom Eaton story in just a few minutes with 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.
If Eaton has sharpened your focus, do not stop here. Use the Simply Wall St Screener to spot other opportunities before everyone else starts talking about them.
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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