Rockwell Automation, Inc. (NYSE:ROK) saw a decent share price growth of 18% on the NYSE over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. But what if there is still an 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 the opportunity still exists.
Is Rockwell Automation Still Cheap?
Rockwell Automation is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. We find that Rockwell Automation's ratio of 36.07x is above its peer average of 23.95x, which suggests the stock is trading at a higher price compared to the Electrical industry. But, is there another opportunity to buy low in the future? Given that Rockwell Automation's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Rockwell Automation look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 37% over the next couple of years, the future seems bright for Rockwell Automation. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? ROK's optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ROK should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on ROK for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ROK, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Rockwell Automation as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Rockwell Automation 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.
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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.
