- Are you wondering if Rockwell Automation is fairly priced at around US$358 a share, or if the recent moves have opened up a better entry point for you?
- The stock has seen mixed returns recently, with a 5.4% decline over the last 7 days and a 13.2% decline over the last 30 days, even though the 1 year return sits at 42.5% and the 5 year return at 49.8%.
- These moves have kept Rockwell Automation on many investors' watchlists, as the pullback over the past month contrasts with its longer term performance. Without any single headline clearly driving the recent shifts, it sets the stage for a closer look at what the current share price might be implying.
- Right now, Rockwell Automation scores 0 out of 6 on our valuation checks, as shown by its valuation score. Next, we will look at how different valuation methods assess the stock and then finish by discussing a more holistic way to think about value beyond the usual models.
Rockwell Automation scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Rockwell Automation Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model looks at the cash Rockwell Automation is expected to generate in the future, then discounts those projected cash flows back to what they might be worth in today's dollars.
For Rockwell Automation, the latest twelve month free cash flow sits at about $1.21b. Analysts provide explicit free cash flow estimates out to 2029, with Simply Wall St extrapolating further to build a 2 Stage Free Cash Flow to Equity model. Under this framework, free cash flow is projected to reach about $1.94b in 2029, with discounted values for the 2026 to 2035 period ranging from roughly $1.20b to $1.08b.
When those projected cash flows are discounted back and aggregated, the model arrives at an estimated intrinsic value of about $270.44 per share. Compared with the current share price of around $358, the DCF output suggests the stock is about 32.5% overvalued on this measure.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Rockwell Automation may be overvalued by 32.5%. Discover 47 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Rockwell Automation Price vs Earnings
For a profitable company like Rockwell Automation, the P/E ratio is a useful yardstick because it links what you pay today to the earnings the business is currently generating. Investors usually accept a higher P/E when they expect stronger growth or see lower risk, and a lower P/E when they expect slower growth or higher risk.
Rockwell Automation currently trades on a P/E of about 40.7x. That sits above the Electrical industry average P/E of roughly 31.4x and the peer average of about 33.6x. This indicates the market is paying a higher price per dollar of earnings than for many similar companies.
Simply Wall St also provides a “Fair Ratio” of 37.6x, which is the P/E level it estimates would be reasonable given Rockwell Automation’s earnings growth profile, industry, profit margins, market cap and risk characteristics. This Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for those company specific factors instead of assuming all firms deserve the same multiple. With the current P/E of 40.7x sitting above the Fair Ratio of 37.6x, this approach points to Rockwell Automation looking somewhat expensive on earnings.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Rockwell Automation Narrative
Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you turn your view of Rockwell Automation into a clear story that links what you think will happen to its revenue, earnings and margins to a financial forecast, a Fair Value, and then a simple comparison against the current share price. This can help you decide if and when you might buy or sell, all within an easy-to-use tool on the Community page that updates as new news or earnings are released. One investor might build a more optimistic Rockwell Automation Narrative that sees a Fair Value around US$495, while another takes a more cautious view closer to US$325. You can see both side by side and decide which story you think is more realistic.
For Rockwell Automation however we will make it really easy for you with previews of two leading Rockwell Automation Narratives:
Start by asking yourself which story feels closer to how you see the business playing out over the next few years, then use that as your anchor when you look at the current share price.
🐂 Rockwell Automation Bull Case
Fair value in this bullish Narrative: US$495.00 per share
Implied discount to that fair value at the last close of US$358.20: about 27.6% undervalued
Assumed annual revenue growth: 7.10%
- Assumes Rockwell Automation benefits from factory digitization, AI enabled automation and Industry 4.0 trends, with recurring software and services playing a bigger role.
- Expects margins to improve as the company focuses on cost reduction, higher value digital offerings and a multi year, US$2b investment program.
- Anchors on a bullish price target of US$410.00 by around 2028, supported by higher revenue, higher profit margins and a future P/E that stays above the industry average.
🐻 Rockwell Automation Bear Case
Fair value in this bearish Narrative: US$324.93 per share
Implied premium to that fair value at the last close of US$358.20: about 10.2% overvalued
Assumed annual revenue growth: 5.26%
- Highlights risks from geopolitical tensions, supply chain localization, open source trends and rising cyber threats that could weigh on growth and margins.
- Builds in ongoing customer delays for large projects and tougher competition from both digital first rivals and larger automation peers.
- Anchors on a fair value of about US$324.93, using lower growth assumptions and a future P/E multiple that sits below the current industry level.
These Narratives give you two clear bookends. If you lean closer to the bullish case, current pricing may look more like an opportunity. If you agree with the bearish assumptions, you might see the recent share price as already baking in a lot of good news.
Either way, the key step is to sense check the revenue growth, margin and P/E assumptions against your own expectations for Rockwell Automation and decide which story you find more realistic over the long run.
Do you think there's more to the story for Rockwell Automation? Head over to our Community to see what others are saying!
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.
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