Let's talk about the popular Emerson Electric Co. (NYSE:EMR). The company's shares led the NYSE gainers with a relatively large price hike in the past couple of weeks. 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, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Emerson Electric's outlook and valuation to see if the opportunity still exists.
View our latest analysis for Emerson Electric
What's The Opportunity In Emerson Electric?
According to my valuation model, Emerson Electric seems to be fairly priced at around 12% below my intrinsic value, which means if you buy Emerson Electric today, you'd be paying a reasonable price for it. And if you believe the company's true value is $108.96, then there's not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Emerson Electric's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Emerson Electric?
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. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Emerson Electric, at least in the near future.
What This Means For You
Are you a shareholder? EMR seems fairly priced right now, 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 beneficial 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 EMR for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems 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 crystalize your views on EMR should the price fluctuate below its true value.
If you want to dive deeper into Emerson Electric, you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for Emerson Electric (1 can't be ignored!) and we strongly recommend you look at these before investing.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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