Eaton (ETN:NYS) Fundamental Valuation Report


This Report was generated using the tools available on StockCalc.com. Patchell Brook Equity Analytics Inc. emphasizes that the user assumes all risks associated with the use of this report or the Stockcalc website including, but not limited to, all terms and conditions mentioned in the legal disclaimer.
To access all of the tools on Stockcalc, including more detailed valuation reports and the models used to generate these valuations, please subscribe for a free 30 day trial of Stockcalc here.

Eaton $81.03 (USD) Close Price as of 07/03/2018

Based on the analysis conducted in this report, Eaton, (ETN:NYS) is found to be  Undervalued.

Company Eaton
Symbol:Exchange ETN:NYS
Industry Industrials:Diversified Industrials
Close Price/Date $81.03 (USD) 07/03/2018
Weighted Average Valuation $86.06 (USD)
Summary ETN:NYS is found to be  Undervalued by 6.2% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $85.50 (USD)
(in order of importance) Discounted Cash Flow: $85.40 (USD)
Comparables: $89.06 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Undervalued on a Cash Flow Valuation basis
Comparable Company Basis: Undervalued on a Comparable Valuation basis
Asset Basis: Fairly valued on an Asset Valuation basis

Valuation Details

Eaton Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for ETN:NYS

Using a discounted cash flow model we generated an intrinsic value of $85.40 (USD) for ETN:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

ETN:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $85.40 1% 5% 1% 5%
WACC (or Ke) 9.24 $105.50 $70.85
Terminal Growth Rate 3.00 $72.33 $103.45
Tax Rate 0.11 $92.04 $78.75
Cash Flow 4,318,069,000 $79.05 $91.75
Capital Expenditures -449,800,000 $84.82 $85.98
Long Term Debt 8,432,000,000 $86.36 $84.44

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $89.06 (USD) for ETN:NYS. We also generated a valuation of $105.53 (USD) using other metrics and comparables.
The comparable companies were Ingersoll-Rand (IR:NYS) and Pentair (PNR:NYS)

Company ETN:NYS End Date Value
Earnings/Share $6.68 (USD)
Book Value/Share $39.19 (USD)
Sales/Share $45.65 (USD)
Cash Flow/Share $5.96 (USD)
EBITDA/Share $10.04 (USD)
Price Based on Comps Adjustment Factor (%)
$145.39 (USD) -35.1
$108.44 (USD) -52.4
$95.07 (USD) -21.1
$105.30 (USD) -25.8
$134.38 (USD) 8.8
ETN:NYS Ratios Used Average Values IR:NYS PNR:NYS
12.13 PE Ratio 21.77 16.97 26.56
2.07 PB Ratio 2.77 3.05 2.48
1.78 PS Ratio 2.08 1.59 2.58
13.59 PCF Ratio 17.66 14.78 20.53
9.43 EV to EBITDA 15.10 12.24 17.97

Multiples

Using a multiples approach we generated a valuation of  $91.76 (USD) for ETN:NYS

Company ETN:NYS End Date Value
Earnings/Share $6.68 (USD)
Book Value/Share $39.19 (USD)
Sales/Share $45.65 (USD)
Cash Flow/Share $5.96 (USD)
EBITDA/Share $10.04 (USD)
Price Based on Comps Adjustment Factor
$110.33 (USD) 0
$77.09 (USD) 0
$67.69 (USD) 0
$79.43 (USD) 0
$124.24 (USD) 0
Ratios Ratio Average
PE Ratio 16.52
PB Ratio 1.97
PS Ratio 1.48
PCF Ratio 13.32
EV to EBITDA 12.37

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  ETN:NYS for the last 10 years was  1.96

We ran the Adjusted Book Value for  ETN:NYS and generated a book value of  $39.22 (USD)
By multiplying these we get an adjusted valuation of  $77.07 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for ETN:NYS. The 4 analysts have a concensus valuation for ETN:NYS for 2018 of $85.50 (USD).

ETN:NYS Eaton

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 5 0 3.1429 Hold 2018-3-6

Current Price: not available

Analyst Consensus
USD Millions 2018 2019 2020
Mean EPS 5.11 5.53 5.84
# EPS Analysts 6 5 1
Mean Revenue 21,192.60 22,033.50 22,549.40
# Revenue Analysts 5 3 1
Mean Target Price 85.50
Mean Cash Flow 7.04 7.43 8.03
Mean EBITDA 3,763.40 4,019.40 4,192.30
Mean Net Income 2,231.80 2,410.30 2,538.10
Mean Debt Outstanding -542.60 -307.40 -4,600.10
Mean Tax Rate 14.17 15.00
Mean Growth Rate 7.49
Mean Capital Expenditure 570.70 578.30 584.90

Company Overview (ETN:NYS USD)

Price 81.03
Range 79.77 – 81.19
52 week 70.44 – 87.86
Open 79.99
Vol / Avg. 2.72M/1.5M
Mkt cap 35.7B
P/E 12.13
Div/yield 2.64/0.03
EPS 6.68
Shares 440.6M
Beta 1.46
Summary chart

Detailed Company Description

Eaton Corp PLC is a power management company. It provides energy-efficient solutions that help its customers effectively manage electrical, hydraulic and mechanical power. Eaton’s products include UPS systems, cylinders, circuit breakers, among others.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

Notice to User


The contents of this report and the Stockcalc website are provided on an ‘‘as is’’ or ‘‘as available’’ basis with all faults and may not be current in all cases. The information in this report or on the website is subject to continuous change and Patchell Brook Equity Analytics Inc. assumes no responsibility to update or amend such information or that the information will be current. Patchell Brook Equity Analytics Inc. does not claim that all information, calculations or opinions presented in this report or on its website are true, reliable, or complete. Accordingly, you should not rely on any of the information as authoritative or as a substitute for the exercise of your own skill and judgment in making an investment or other decision. Any information, data, opinions, calculations or recommendations provided by third parties through links to other websites or otherwise made available through this report or website are solely those of the third party and not of Patchell Brook Equity Analytics Inc. Please refer to the Terms of Use on www.stockcalc.com for further information.
To access all of the tools on Stockcalc, including more detailed valuation reports and the models used to generate these valuations, please subscribe for a free 30 day trial of Stockcalc here.

%d bloggers like this: