Should You Buy Eaton Stock While It's Below $400?

Eaton Corporation (NYSE: ETN) has garnered significant investor interest due to its exposure to the rapidly growing data center infrastructure market, and rightly so. Still, is it enough to justify the current valuation, and what do investors need to assume about the company's growth prospects to buy the stock? Here's the lowdown.The change in investor sentiment toward Eaton is expressed in the chart below. Traditionally, electrical and power products companies were viewed as mature and relatively low-growth entities that struggled to expand beyond the confines of low-single-digit gross domestic product growth. As a rough rule of thumb, such companies in the industrial world are accorded a ratio of enterprise value (market cap plus net debt) to earnings before interest, taxation, depreciation, and amortization (EBITDA) of about 11 and/or a price-to-free-cash-flow ratio of about 20.As you can see in the following chart, these valuations are mainly consistent with what Eaton previously traded at. However, in recent years, there has been a significant increase in the valuation investors are willing to pay.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool