Let's talk about the popular Rockwell Automation, Inc. (NYSE:ROK). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$307 at one point, and dropping to the lows of US$253. 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 Rockwell Automation's current trading price of US$273 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 Rockwell Automation's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Rockwell Automation Still Cheap?
According to our valuation model, Rockwell Automation seems to be fairly priced at around 10.07% above our intrinsic value, which means if you buy Rockwell Automation today, you'd be paying a relatively reasonable price for it. And if you believe that the stock is really worth $248.45, there's only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Rockwell Automation'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 Rockwell Automation generate?
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. Rockwell Automation's earnings over the next few years are expected to increase by 40%, 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? It seems like the market has already priced in ROK's positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you've been keeping tabs on ROK, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Rockwell Automation at this point in time. For example - Rockwell Automation has 1 warning sign we think you should be aware of.
If you are no longer interested in Rockwell Automation, 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.