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Peter Lynch Guru Analysis for Emerson Electric Company

EMR 
$65.38
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0.32
0.49%
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Exchange: NYSE
Industry: Energy
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Assessments & Analysis Based on November 24, 2014 close price: $65.77

  for the P/E/Growth Investor based on the criteria of Peter Lynch. Return to EMR Guru Analysis

All Star Guru Scorecard

Source Go Chart %
Peter Lynch 0%
Benjamin Graham 29%
Validea 50%
Motley Fool 25%
David Dreman 36%
Martin Zweig 46%
Kenneth Fisher 18%
James P. O'Shaughnessy 60%



Detailed Analysis

Guru Score: 0%


Determine the Classification:

According to this methodology, EMR is a "Slow Grower", based on its single digit earnings growth of 2.7233%, Based on the average of the 3, 4 and 5 year historical EPS growth rates.


SALES: [PASS]

EMR would fall into the "Dividend Payers" category according to this methodology. The first requirement of a Slow Grower is that its sales exceed one billion. EMR's sales are $24,537 million. It passes the test.


Inventory To Sales: [PASS]

When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for EMR was 7.68% last year, while for this year it is 8.38%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (.7%) is below 5%.


YIELD COMPARED TO THE S&P 500: [FAIL]

This methodology also maintains that the Yield of a "Slow Grower" should be high, which includes being higher than the S&P average (currently 2.15%). The yield for EMR is not available, which means this criterion cannot be analyzed.


YIELD ADJUSTED P/E/GROWTH (PEG) RATIO: [FAIL]

This methodology would consider the Yield-adjusted P/E/G ratio for EMR of 3.86, Based on the average of the 3, 4 and 5 year historical EPS growth rates, to be unacceptable. This criteria is the most important one in the methodology and a failure of it will automatically result in a 0% score for the overall analysis.


Total Debt/Equity Ratio: [PASS]

This methodology would consider the Debt/Equity ratio for EMR (59.53%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for EMR should be good enough to compensate.


FREE CASH FLOW: [NEUTRAL]

The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for EMR (3.71%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.


NET CASH POSITION: [NEUTRAL]

Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for EMR (6.8%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.

 
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