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Is Now An Opportune Moment To Examine Emerson Electric Co. (NYSE:EMR)?

Simply Wall St
Updated ·3-min read

Today we're going to take a look at the well-established Emerson Electric Co. (NYSE:EMR). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$98.20 and falling to the lows of US$80.53. 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 Emerson Electric's current trading price of US$85.41 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 Emerson Electric’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 Emerson Electric

Is Emerson Electric Still Cheap?

According to my valuation model, Emerson Electric seems to be fairly priced at around 9.2% 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 that the stock is really worth $94.09, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Emerson Electric’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Emerson Electric generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 -12%, 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? 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 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.

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Are you a potential investor? If you’ve been keeping tabs on EMR for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign 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.

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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