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Eaton Corporation plc (ETN) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Eaton Corporation plc (ETN)

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Intrinsic Value (DCF)

Current$333.46
→
Intrinsic$185.21
-44%
$116.59$185.21$321.77
Market implies 27% growth for 5 years
Current price reflects execution expectations above 13% growth — not unreasonable for quality businesses.
At $333, the market prices in continued strong cash flow growth (27%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $117 → Bull $322. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →9%11%13%15%
8%$234$257$282$308
10%$154$169$185$203
12%$111$122$134$147
14%$85$93$103$113

Bull Case

  • Bull case ($322) with 15% growth, 8% discount rate
  • Conservative 13% growth assumption is achievable based on track record

Bear Case

  • Bear case ($117) implies 65% downside at 10% growth, 12% discount
  • Price reflects 27% growth expectations vs 13% historical — high bar to clear
  • Trading 44% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$3.96B
Year 2$4.46B
Year 3$5.02B
Year 4$5.66B
Year 5$6.37B
Terminal$100.90B

📐 Model Inputs

Growth Rate12.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$3.52BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is ETN stock undervalued or overvalued?
🔴 OVERVALUED

ETN trades at $333.46 vs. our DCF-derived intrinsic value of $185.21, implying -44% downside. Using a 9.5% WACC and 12.6% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($280.03) suggests limited upside.

What is ETN's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.52B, projected at 12.6% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $9.27B net debt and dividing by 0.40B shares: Bear $119.31 | Base $185.21 | Bull $280.03. Current price $333.46 implies -44% to base case.

How is ETN's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 12.6% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($83.24B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 23.7x.