Should Value Investors Buy Eaton (ETN) Stock?

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is Eaton (ETN). ETN is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 13.81. This compares to its industry's average Forward P/E of 15.87. Over the past year, ETN's Forward P/E has been as high as 17.82 and as low as 13.62, with a median of 14.99.

Investors should also note that ETN holds a PEG ratio of 1.35. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ETN's PEG compares to its industry's average PEG of 1.62. Over the past 52 weeks, ETN's PEG has been as high as 2.11 and as low as 1.33, with a median of 1.50.

Investors should also recognize that ETN has a P/B ratio of 2.08. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 4.53. Over the past 12 months, ETN's P/B has been as high as 2.29 and as low as 1.84, with a median of 2.07.

Finally, we should also recognize that ETN has a P/CF ratio of 8.66. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 18.24. ETN's P/CF has been as high as 9.99 and as low as 8.09, with a median of 9.03, all within the past year.

These are only a few of the key metrics included in Eaton's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, ETN looks like an impressive value stock at the moment.

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