Yahoo Finance What Does Eaton Corporation plc’s (NYSE:ETN) Share Price Indicate?
Let’s talk about the popular Eaton Corporation plc (NYSE:ETN). The company’s shares saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Eaton’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Eaton
What’s the opportunity in Eaton?
According to my valuation model, Eaton seems to be fairly priced at around 10.72% above my intrinsic value, which means if you buy Eaton today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $75.04, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Eaton’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Eaton look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -14.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Eaton. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, ETN appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ETN for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ETN should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Eaton. You can find everything you need to know about Eaton in the latest infographic research report. If you are no longer interested in Eaton, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
