Let's talk about the popular Emerson Electric Co. (NYSE:EMR). The company's shares received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. 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. However, what if the stock is still a bargain? Today we will analyse the most recent data on Emerson Electric's outlook and valuation to see if the opportunity still exists.
Is Emerson Electric Still Cheap?
According to our valuation model, Emerson Electric seems to be fairly priced at around 0.5% below our intrinsic value, which means if you buy Emerson Electric today, you'd be paying a fair price for it. And if you believe that the stock is really worth $124.71, then there's not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Emerson Electric'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.
Can we expect growth from Emerson Electric?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 98% over the next couple of years, the future seems bright for Emerson Electric. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? EMR's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping an eye on EMR, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Emerson Electric, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Emerson Electric you should know about.
If you are no longer interested in Emerson Electric, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
