Now is not the time to buy Eaton stock

We believe there is a near-equal mix of good and bad in ETN stock given its overall Moderate operating performance and financial condition. But keeping in mind its Very High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $142 Bil in market cap, Eaton provides power management solutions, including electrical components, aerospace hydraulic systems, and vehicle transmissions, clutches, and hybrid power systems worldwide.

[1] Valuation Looks Very High

This table highlights how ETN is valued vs broader market. For more details see: ETN Valuation Ratios

[2] Growth Is Moderate

• Eaton has seen its top line grow at an average rate of 8.6% over the last 3 years
• Its revenues have grown 7.0% from $24 Bil to $25 Bil in the last 12 months
• Also, its quarterly revenues grew 7.3% to $6.4 Bil in the most recent quarter from $5.9 Bil a year ago.

This table highlights how ETN is growing vs broader market. For more details see: ETN Revenue Comparison

[3] Profitability Appears Moderate

• ETN last 12 month operating income was $4.8 Bil representing operating margin of 19.1%
• With cash flow margin of 16.2%, it generated nearly $4.1 Bil in operating cash flow over this period
• For the same period, ETN generated nearly $3.9 Bil in net income, suggesting net margin of about 15.6%

This table highlights how ETN profitability vs broader market. For more details see: ETN Operating Income Comparison

[4] Financial Stability Looks Strong

• ETN Debt was $11 Bil at the end of the most recent quarter, while its current Market Cap is $142 Bil. This implies Debt-to-Equity Ratio of 7.5%
• ETN Cash (including cash equivalents) makes up $1.9 Bil of $39 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.9%

[4] Downturn Resilience Is Moderate

ETN saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• ETN stock fell 28.4% from a high of $174.66 on 9 November 2021 to $125.04 on 14 July 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 17 February 2023
• Since then, the stock increased to a high of $392.76 on 28 July 2025 , and currently trades at $357.49

 
2020 Covid Pandemic

• ETN stock fell 45.0% from a high of $105.10 on 20 February 2020 to $57.77 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 2 September 2020

 
2008 Global Financial Crisis

• ETN stock fell 70.5% from a high of $51.27 on 23 July 2007 to $15.13 on 9 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 3 January 2011

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ETN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.