Rockwell Automation Inc (ROK, Financial) experienced a daily loss of -1.6%, with a 3-month gain of 8.83%. The company's Earnings Per Share (EPS) sits at 12.26. But is the stock fairly valued? This article offers an in-depth analysis of Rockwell Automation's valuation, encouraging readers to delve into the following analysis.
Company Introduction
Rockwell Automation is a pure-play automation competitor and the successor entity to Rockwell International, which spun off its former Rockwell Collins avionics segment in 2001. As of fiscal 2021, the firm operates through three segments--intelligent devices, software and control, and lifecycle services. With a current stock price of $312.17 per share and a market cap of $35.90 billion, Rockwell Automation appears to be fairly valued when compared to its GF Value of $334.48.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. According to GuruFocus Value calculation, Rockwell Automation (ROK, Financial) is fairly valued.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Rockwell Automation's cash-to-debt ratio of 0.11 ranks worse than 91.18% of companies in the Industrial Products industry, suggesting a fair balance sheet.
Profitability and Growth
Profitable companies, especially those with consistent profitability over the long term, are typically safer investments. Rockwell Automation's operating margin is 18.87%, ranking better than 90.5% of companies in the Industrial Products industry. However, its 3-year average annual revenue growth of 5.8% ranks worse than 51.61% of companies in the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can evaluate its profitability. Rockwell Automation's ROIC of 13.91 exceeds its WACC of 11.05, indicating value creation for its shareholders.
Conclusion
In conclusion, Rockwell Automation's stock appears to be fairly valued. The company exhibits fair financial condition and strong profitability, despite its growth ranking worse than 52.31% of companies in the Industrial Products industry. For more information about Rockwell Automation stock, check out its 30-Year Financials here.
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