I will not be adding to my position now because I think I can get it at a lower price.
Since the last article, it dropped 5.13% versus the 1.87% gain the S&P 500 (NYSEARCA:SPY) posted. Emerson is a diversified global technology company which is engaged in designing and supplying products and technology, and delivering engineering services and solutions in the industrial and commercial worlds.
On February 4, 2014, the company reported fourth quarter earnings of $0.67 per share, which was in-line with the consensus of analysts' estimates. In the past year, the company's stock is up 10.67% excluding dividends (up 13.33% including dividends), and is losing to the S&P 500, which has gained 20.98% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if it's worth buying more shares of the company right now for the technology sector of my dividend portfolio.
The company currently trades at a trailing 12-month P/E ratio of 23.04, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 15.3 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (2.09), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 11.04%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 11.04%. Below is a comparison table of the fundamentals metrics for the company for when I wrote all articles pertaining to the company.
EPS Next YR ($)
Target Price ($)
EPS next YR (%)
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 2.67% with a payout ratio of 61% of trailing 12-month earnings while sporting return on assets, equity and investment values of 8.4%, 19.2% and 14.1%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 2.67% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 57 years at a 5-year dividend growth rate of 6.2%. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.
Payout TTM (%)
Looking first at the relative strength index chart [RSI] at the top, I see the stock in middle-ground territory with a current value 41.72. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line just crossed above the red line with the divergence bars increasing in height, indicating bullish momentum but looking to be tired. As for the stock price itself ($64.51), I'm looking at the 20-day simple moving average (currently $65.41) to act as resistance and the $63.21 to act as support for a risk/reward ratio which plays out to be -2.02% to 1.40%.
- The company reported in-line earnings but beat revenue. Fourth quarter earnings were $0.67 per share on revenue of $5.61 billion which beat estimates by $60 million.
- Net profit increased 1.8% in the fourth quarter. This was due in large part to stronger growth in the process management and climate technology segments which grew revenues by 7.6% and 4.5%, respectively.
- SPX Corporation (NYSE:SPW) sold its EGS stake to Emerson. Back in early December the company acquired the 44.5% stake in EGS Electric Group from SPX for $571 million.
The global economy is growing very slowly right now with lots of concerns in emerging markets which may not bode well for this company right now. Fundamentally the company is fairly priced based on future earnings and expensive future growth potential. Financially the dividend is secure but doesn't have a high enough yield to take cover under. On a technical basis, I believe there is some bullish momentum, but it is getting long in the tooth. Due to the fair valuation on next year's earnings, low dividend yield, and expensive valuation on growth potential I'm not going to be buying a position at this price.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!