Is Emerson Electric Still Attractive After 80% Five Year Surge And Recent Pullback?

• Wondering if Emerson Electric at around $131 a share is still worth buying, or if the easy money has already been made? Let us unpack what the current price really implies about its long term value.
• The stock has slipped about 5.5% over the last month despite being up 7.9% year to date and roughly 80% over five years, a mix that suggests sentiment is cooling a bit after a strong multi year run.
• That cooling has come as investors digest Emerson's ongoing portfolio reshaping, including its push deeper into automation and software after past deals like the AspenTech combination and continued exits from lower growth, non core businesses. Together, those moves have shifted the narrative from an old line industrial to a more diversified automation and tech driven player. This helps explain both the earlier enthusiasm and the recent pause.
• On our valuation checks Emerson scores a 3/6 on undervaluation, and you can see the breakdown in this valuation score. There is already a mixed message in the numbers, and in the sections ahead we will walk through the main valuation approaches investors are using today, before finishing with a more nuanced way to think about what the market is really pricing in.

Find out why Emerson Electric's 0.5% return over the last year is lagging behind its peers.

Approach 1: Emerson Electric Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in $ terms. For Emerson Electric, the 2 Stage Free Cash Flow to Equity model starts with last twelve months free cash flow of about $2.7 billion and then layers on analyst forecasts and longer term projections.

Analysts see free cash flow rising into the next decade, with Simply Wall St extrapolating that to roughly $12.8 billion by 2035 based on a mix of explicit estimates through 2029 and moderating growth assumptions thereafter. When all those future $ cash flows are discounted back, the intrinsic value comes out near $230 per share. This implies the shares trade at about a 42.7% discount to this estimate.

Compared with a current price around $131, the DCF suggests Emerson Electric is materially undervalued, assuming these cash flow and discount rate assumptions hold up.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Emerson Electric is undervalued by 42.7%. Track this in your watchlist or portfolio, or discover 925 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Emerson Electric.

Approach 2: Emerson Electric Price vs Earnings

For a profitable, established business like Emerson Electric, the price to earnings (PE) ratio is a useful way to gauge how much investors are willing to pay for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher uncertainty usually point to a lower, more conservative multiple.

Emerson currently trades on roughly 32.4x earnings, which is a touch above the Electrical industry average of about 30.9x but well below the broader peer group sitting near 45.4x. Simply Wall St also estimates a Fair Ratio for Emerson of around 31.8x, which reflects what investors might reasonably pay given its earnings growth outlook, profitability, industry positioning, size and risk profile.

This Fair Ratio is more informative than a simple comparison with peers or the industry because it explicitly bakes in company specific factors rather than assuming all businesses deserve the same multiple. With Emerson’s actual PE of 32.4x sitting very close to the 31.8x Fair Ratio, the market appears to be pricing the stock roughly in line with its fundamentals at today’s earnings level.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Emerson Electric Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, an easy tool on Simply Wall St’s Community page that lets you attach a clear story to your numbers. You can connect your view of Emerson Electric’s future revenue, earnings and margins to a financial forecast and then to a fair value estimate. You can compare that estimate directly with today’s share price to decide whether to buy, hold or sell. The platform automatically refreshes your Narrative when new news or earnings arrive. One investor might believe Emerson’s push into digital automation and AI will drive strong, steady growth and justify a fair value near the bullish target of about $185. Another might worry more about integration risks, cyclicality and margin pressure and therefore anchor their fair value closer to the cautious $111 end of the range. Both perspectives are expressed clearly through their own Narrative and are kept up to date as the facts evolve.

Do you think there's more to the story for Emerson Electric? Head over to our Community to see what others are saying!

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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