What Is Eaton Corporation plc's (NYSE:ETN) Share Price Doing?

Eaton Corporation plc (NYSE:ETN) saw significant share price movement during recent months on the NYSE, rising to highs of US$378 and falling to the lows of US$331. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Eaton's current trading price of US$346 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Eaton’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Eaton

What Is Eaton Worth?

Eaton appears to be overvalued by 38% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$346 on the market compared to our intrinsic value of $251.68. This means that the opportunity to buy Eaton at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Eaton’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Eaton generate?

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. 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. Eaton's earnings over the next few years are expected to increase by 41%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? ETN’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ETN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ETN for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ETN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Eaton, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Eaton you should be aware of.

If you are no longer interested in Eaton, 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.