Emerson Electric Company (EMR)

Conclusion

Emerson Electric is a US industrial technology company that makes control valves, measurement instruments, discrete automation equipment and professional tools. At 169.52 USD on 9 November 2026, its market capitalisation is 94.6 billion USD.

The verdict is overvalued. The P/E of 35.1x is a premium of 42.7% to its ten-year median of 24.6x, and EV/EBITDA of 19.8x is a premium of 19.4% to its median of 16.6x. The DCF gives 96.68 USD per share at a discount rate of 10.9%. The fair value band runs from 94.27 to 141.40 USD with a midpoint of 117.83 USD, a margin of safety of -30.5% at the current price. The reverse DCF implies 14.5% annual growth, while the company delivered 8.0% revenue growth and 4.8% free cash flow per share growth over five years.

What supports the case: net debt to EBITDA of 1.96x, interest coverage of 11.4x, and a Piotroski score of 8 out of 8. What would break it: a current ratio of 0.94, a five-year free cash flow conversion of 50.3%, and a return on invested capital of 9.5% against a WACC of 10.1%.

Financial health

Financial strength is green: net debt to EBITDA of 1.96x and interest coverage of 11.4x both pass, while the current ratio of 0.94 is only neutral. The quick ratio is 0.51 and debt to equity is 0.59. The Altman Z-score is not available because the inputs it needs are missing. The Altman model was designed for manufacturers, so it is an imperfect guide for this industrial group. Insolvency risk: low, about 0.27% by the estimate of the Ohlson model over one to two years. The company's liquidity is the main point to monitor, since current liabilities exceed current assets.

Earnings quality

Earnings quality is yellow. Free cash flow conversion is strong at 131.4% on a trailing basis but weak at 50.3% over five years, which is assessed as bad. The accrual ratio is -3.07%, which indicates cash earnings above reported earnings. Stock-based compensation is 1.25% of revenue, and free cash flow after it is 3.30 billion USD. The share count fell by 1.36% a year over five years, reflecting buybacks. The Piotroski score is 8 out of 8. The Beneish M-score is not available. The company beat earnings estimates in 7 of the last 8 quarters, with an average surprise of 2.5%. Analysts raised next-year EPS estimates by 1.05% over 90 days, with 5 upward revisions and 2 downward in the last 30 days.

Profitability

Profitability is green. Margins sit above their ten-year medians: gross margin is 53.4% against 45.0%, operating margin is 20.1% against 17.0%, and net margin is 14.2% against 12.7%. Margin stability is measured at 0.0891. The key weakness is return on invested capital of 9.5% against a WACC of 10.1%, giving a return on invested capital minus WACC of -0.62%, which is only neutral. Return on equity is 13.0%. The DuPont split shows a 14.2% net margin, an asset turnover of 0.45, and an equity multiplier of 2.02x, so leverage contributes significantly to the return on equity.

Growth

Growth is green. Revenue compounded at 7.8% over three years, 8.0% over five years and 2.7% over ten years. Revenue grew in 8 of the last 10 years. EPS compounded at 4.6% over five years and 6.6% over ten years, but fell by 40.6% a year over three years. Free cash flow per share compounded at 4.8% over five years. Consensus expects next-year EPS growth of 10.4%.

Valuation

Valuation is red. The P/E of 35.1x is a 42.7% premium to its ten-year median, and price to sales of 5.0x is a 35.2% premium to its median of 3.7x. Price to book of 4.6x is a 3.8% discount to its median of 4.7x. The DCF gives 96.68 USD per share, using a discount rate of 10.9%, a first-stage growth rate of 8.0%, and a terminal growth rate of 2.5%. The fair value from historical multiples is 138.98 USD. The fair value band runs from 94.27 to 141.40 USD with a midpoint of 117.83 USD, a margin of safety of -30.5% at a price of 169.52 USD. The reverse DCF implies 14.5% growth, well above the 8.0% revenue growth delivered over five years. The dividend yield is 1.3% and the payout on free cash flow is 35.2%. These fair values are order-of-magnitude estimates built on fixed assumptions, not price targets.

Risks

The main risk is valuation: the price already assumes growth above what the company has delivered. A weaker growth outcome would leave little room to justify the current multiples. The current ratio below 1.0 means short-term obligations exceed liquid assets, so any tightening of funding would matter more. Five-year free cash flow conversion of 50.3% means reported earnings have not reliably turned into cash, and returns below the cost of capital would limit value creation. Values not available include the Altman Z-score and the Beneish M-score. This analysis has no debt maturity schedule and no revenue breakdown by segment, so it cannot assess refinancing risk or which segments drive growth.