Is It Too Late To Consider Buying Emerson Electric Co. (NYSE:EMR)?

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. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Emerson Electric’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Emerson Electric

Is Emerson Electric Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.5% 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 $104.35, 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.

What kind of growth will Emerson Electric generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Emerson Electric, it is expected to deliver a negative earnings growth of -9.5%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, EMR 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 de-risk 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 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 gel your views on EMR should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. When we did our research, we found 2 warning signs for Emerson Electric (1 is significant!) that we believe deserve your full attention.

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.