Emerson Electric (EMR:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Emerson Electric(EMR:NYS)

Industrials:Diversified Industrials

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$67.11 (USD) 20/11/2018

Weighted Valuation
$76.93 (USD)

Overall Rating
Undervalued by 14.6%

Valuation Models Analyst Consensus: $80.25 (USD)
(in order of importance) Discounted Cash Flow: $69.63 (USD)
Comparables: $81.58 (USD)
Valuation Methods This company is:
Cash Flow: Fairly valued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Fairly valued on an Asset Valuation

Company Overview (EMR:NYS USD)

Price 67.11
Range 66.71 – 68.11
52 week 61.63 – 78.52
Open 67.94
Vol / Avg. 3.34M/4.42M
Mkt cap 42.02B
P/E 19.40
Div/yield 1.94/0.03
EPS 3.46
Shares 626.16M
Beta 1.21

Company Description

Emerson Electric is a multi-industrial conglomerate that operates under two business platforms: Automation Solutions and Commercial and Residential Solutions. The latter is further subdivided into two operating segments: climate technologies, which sells HVAC and refrigeration products and services, as well as tools and home products, which sells tools and compressors, among other products and services. Commercial and residential solutions boasts several household brands, including Copeland, InSinkErator, and RIDGID. Automation solutions is most known for its process manufacturing solutions, which consists of measurement instrumentation, as well as valves and actuators, among other products and services. About half of the firm’s geographic sales take place in the United States.

Valuation Details

 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 EMR:NYS

Using a discounted cash flow model we generated an intrinsic value of $69.63 (USD) for EMR:NYS

Sensitivity Analysis

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

EMR:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $69.63 1% 5% 1% 5%
WACC (or Ke) 9.60 $84.08 $58.98
Terminal Growth Rate 3.00 $60.23 $82.38
Tax Rate 0.17 $74.46 $64.80
Cash Flow 4,352,265,000 $65.60 $73.66
Capital Expenditures 0 $69.63 $69.63
Long Term Debt 7,282,000,000 $70.21 $69.05

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $81.58 (USD) for EMR:NYS. We also generated a valuation of $59.00 (USD) using other metrics and comparables.
The comparable companies were Dover (DOV:NYS), General Electric (GE:NYS), 3M (MMM:NYS), Rockwell Automation (ROK:NYS) and Roper Technologies (ROP:NYS).

Company EMR:NYS End Date Value
Earnings/Share $3.46 (USD)
Book Value/Share $13.44 (USD)
Sales/Share $26.59 (USD)
Cash Flow/Share $4.27 (USD)
EBITDA/Share $5.71 (USD)
Price Based on Comps Adjustment Factor (%)
$106.43 (USD) -23.5
$91.64 (USD) 4.4
$80.24 (USD) 18.3
$71.80 (USD) -19.4
$85.01 (USD) -7.3
EMR:NYS Ratios Used Average Values DOV:NYS GE:NYS MMM:NYS ROK:NYS ROP:NYS
20.82 PE Ratio 30.76 16.34 0.00 25.50 53.83 27.36
5.05 PB Ratio 6.82 2.73 2.79 10.81 13.77 4.01
2.55 PS Ratio 3.02 1.61 0.72 3.52 3.20 6.03
15.90 PCF Ratio 18.57 17.21 12.36 19.12 20.27 23.89
12.73 EV to EBITDA 14.89 10.67 0.00 13.81 14.37 20.71

Multiples

Using a multiples approach we generated a valuation of  $62.07 (USD) for EMR:NYS

Company EMR:NYS End Date Value
Earnings/Share $3.46 (USD)
Book Value/Share $13.44 (USD)
Sales/Share $26.59 (USD)
Cash Flow/Share $4.27 (USD)
EBITDA/Share $5.71 (USD)
Price Based on Comps Adjustment Factor
$71.95 (USD) 0
$61.46 (USD) 0
$54.73 (USD) 0
$59.05 (USD) 0
$63.16 (USD) 0
Ratios Ratio Average
PE Ratio 20.79
PB Ratio 4.57
PS Ratio 2.06
PCF Ratio 13.83
EV to EBITDA 11.06

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  EMR:NYS for the last 10 years was  4.55

We ran the Adjusted Book Value for  EMR:NYS and generated a book value of  $14.22 (USD)
By multiplying these we get an adjusted valuation of  $64.64 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for EMR:NYS. The 4 analysts have a concensus valuation for EMR:NYS for 2019 of $80.25 (USD).

EMR:NYS Emerson Electric

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 3 0 4.1250 Outperform 2018-11-19

Current Price: 67.11 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 3.72 4.07 3.83
# EPS Analysts 7 6 1
Mean Revenue 18,919.70 19,842.30 19,340.70
# Revenue Analysts 6 5 1
Mean Target Price 80.25
Mean Cash Flow 5.04 5.55 5.24
Mean EBITDA 4,021.40 4,327.80 4,225.50
Mean Net Income 2,322.10 2,508.30 2,368.50
Mean Debt Outstanding 2,892.70 2,156.80
Mean Tax Rate 28.27 25.00
Mean Growth Rate 9.05
Mean Capital Expenditure 617.30 625.30 633.60

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


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