EMERSON ELECTRIC CO. (EMR): what the price requires

At today's price, EMERSON ELECTRIC CO. (EMR) is priced for today's economics sustained for ~5.7 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/EMR

Headline

FieldValue
TickerEMR
CompanyEMERSON ELECTRIC CO.
Current price$135.37/sh
CompositionFinal Control 24% / Measurement & Analytical 23% / Discrete Automation 14% / Safety & Productivity 7% / Control Systems & Software 23% / Test & Measurement 8%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed14.1%
Operating margin today16.0%
Margin compression implied-1.9pp
Must persist for5.7y
Multiple paid30x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 9.1% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.8 years.

How unusual the bet is: high

ReferenceValue
vs own history+2.24σ
cohort percentile (of 225 peers)69
sustained it ~5.7 years at this level30%
implied end-window share0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.59x4expensive
Earnings3.88x3expensive
Relative1.77x2expensive
Growth1.35x3expensive

Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.4%); the inversion above states its own rate.

Per-Model Detail (n=12)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$99.111.37xyesFCF base $3.1B, growth 4% (input: historical growth), terminal g 4.0%, WACC 8.4%, 5yr projection
DCF Exit MultipleGrowth$122.191.11xyesExit EV/EBITDA: 59.0x / 61.0x / 63.0x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$71.801.89xyesP/E 21.95x (blended: sector 18x + trailing (TTM) 31x), scenarios: 18.5x / 21.9x / 25.4x (bear / base = sector held flat / bull), EV/EBITDA 26.4x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$46.972.88xyesBV/sh $36.06, ROE (TTM) 12.0%, ke 9.3%
Two-Stage Excess ReturnAsset$53.282.54xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$100.111.35xyesRev $18.3B, growth 4% (input: historical growth; tapered), Terminal P/S: 3.5x / 4.2x / 4.8x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset$54.562.48xyesBV $36.06 + 5yr PV of (ROE (TTM) 12.0% − Kₑ 9.3%) × BV; BV grows 7.8%/yr
Graham NumberAsset$51.192.64xyes√(22.5 × EPS $3.23 × BVPS $36.06) — Graham's conservative floor
EV/EBITDA RelativeRelative$6.5620.64xyesEBITDA $1.48B × sector EV/EBITDA 12.0x (excluded from median)
FCF YieldEarnings$34.853.88xyesFCF $3115.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$30.034.51xyesSBC-adj FCF $2.86B (FCF $3.12B − SBC $0.25B) capitalized at Kₑ
Ben Graham FormulaEarnings$2.7149.95xyesEPS $3.23 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$81.331.66xyesRevenue $18.32B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$34.923.88xyesEPS $3.23 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$14.7b
Net debt / NOPAT (after-tax)6.45x
Net debt / operating income (pre-tax)5.02x
Share count CAGR (buyback)-1.4%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Traditional valuation models miss what Emerson has become. They see a 32 times operating-income multiple on a name they still file under industrial machinery and conclude it is expensive. What they undervalue is that Emerson is no longer primarily a maker of valves and instruments; it is an automation platform with a large, high-margin software layer bolted into the core. The filing confirms the shift: AspenTech's results, previously a separate segment, are now consolidated into Control Systems and Software (EMR FY2025 10-K, accession 0000032604-25-000087), and that segment plus Measurement and Analytical now make up a far larger share of the company than the legacy discrete and safety lines. A measurement-and-control franchise with recurring software revenue earns a different multiple than a cyclical equipment maker, and the static models that anchor on book value and normalized EBIT cannot see that re-rating.

The portfolio is the moat. Emerson's six segments span Final Control, Measurement and Analytical, Discrete Automation, Safety and Productivity, Control Systems and Software, and Test and Measurement, and the combination gives it a near-complete stack for instrumenting and automating a process plant. Switching costs in installed process-automation systems are high, because a customer who standardizes on Emerson's control architecture does not rip it out, and AspenTech's modeling and optimization software deepens that lock-in. Management has set 2028 targets of $21 billion in net sales and a 30 percent adjusted segment EBITA margin, and it completed the AspenTech and Test and Measurement integrations while delivering on a commitment of $200 million of run-rate cost synergies. This is a company executing a deliberate mix shift toward higher-margin, stickier revenue.

The capital-return profile is the kind only a durable franchise sustains. Emerson has raised its dividend for 69 consecutive years, one of the longest streaks in the market, at a conservative payout near 34 percent, and it plans to return $10 billion to shareholders through 2028 while continuing to retire shares. The discounted-future-market-cap method lands near $111 and the perpetual-growth DCF near $97, both reflecting the modest 4 percent organic growth the legacy book contributes, but the real bull case is that the software mix lifts both the growth rate and the multiple over time. The analyst community sees it: the median target sits near $153, Bernstein at $175 and Evercore at $185, with a buy-leaning consensus. The bet is that the automation-and-software Emerson compounds at a rate the old industrial Emerson never could.

Bear Case

Strip away the transformation narrative and look at what the price asks the business to do, and the disconnect is stark. Emerson is being valued as though the software re-rating is already complete and permanent, when in reality it is a recently leveraged industrial company carrying the cost of an expensive acquisition. The qualitative tell comes first: a 69-year dividend-growth aristocrat with mid-single-digit organic growth does not normally trade at 32 times operating income, and the gap between that multiple and the underlying cash-generation pace is the warning. The price implies a sustained 15.8 percent operating margin held for nearly seven years and a rarity read that flags it as high, with an own-history z-score above 2. The market is paying a premium that no standard valuation family reaches: it is rich on assets, on earnings power, on peers, and even on forward growth.

The balance sheet is the concrete cost of the story. Net debt is about $14.7 billion, roughly five times trailing operating income, and that leverage is largely the bill for buying in AspenTech's minority at $265 per share, a $7.2 billion outlay that valued the software unit richly. The filing details the intangible-asset and goodwill load that came with it, including assumptions about attrition rates for customer relationships and obsolescence rates for developed technology (EMR FY2025 10-K, accession 0000032604-25-000087). Those intangibles amortize against reported earnings, which is why the normalized earnings-power value collapses in the model: the five-year-average operating income is depressed by acquisition and restructuring charges. The company paid up for growth, and the equity now sits on top of a much larger debt claim than the legacy Emerson ever carried.

The third pressure is that the static methods cluster far below the price for a reason. The simple excess-return model lands near $47, residual income near $55, and the Graham number near $51, all roughly a third of the current price, because trailing ROE of about 12 percent sits only modestly above the 9.3 percent cost of equity. The bull answer is that software changes the math, but software is still a minority of revenue and the $21 billion 2028 sales target implies only modest top-line growth from here. If process-automation capital spending softens, or if the software synergies disappoint, the premium compresses toward the asset and earnings floors. Pay 32 times operating income for 4 percent organic growth and you are underwriting a re-rating that has to keep going to justify a price the fundamentals do not yet support.

Valuation

The valuation question is whether 32 times whole-company operating income is a fair price for an automation-and-software platform or an overpayment for a slow-growing industrial. The inversion frames it: at $150.66 the price implies a sustained operating margin near 15.8 percent held for about 6.7 years at a 9.3 percent cost of capital, where each percentage point of growth moves value about $1.87. The current margin is about 16 percent, so the bet is almost entirely on duration, on Emerson holding its current profitability for the better part of a decade. The rarity read is high, with an own-history z-score above 2, which says the embedded expectation sits well above what the company has historically commanded.

The X-ray shows no valuation family reaching the price. The growth methods come closest: perpetual-growth DCF near $97 and discounted future market cap near $111 on 4 percent organic growth, with the exit-multiple DCF near $133 only because it applies a very high exit EV/EBITDA. The relative-valuation read at $74.17 on a blended 23 times P/E is far below. The asset family clusters in the $47 to $55 range off a $36.06 book value per share and 12 percent ROE, and the normalized earnings-power value collapses to a penny because acquisition and restructuring charges crush the five-year-average operating income, a methodology artifact rather than a real signal.

The synthesis is a genuine premium for a genuine transformation. The static methods that read EMR cheap on assets and earnings power are anchoring on a legacy-industrial view that the AspenTech consolidation and the software mix shift are deliberately moving away from. But the size of the gap, a price near $150 against an inversion midpoint near $64 and an asset floor near $50, means the market has already priced a large portion of the re-rating. The analyst targets near $153 to $185 say the recovery and mix shift continue; the valuation floor says the downside if they stall is substantial. The deciding variable is whether the software-and-automation revenue grows fast enough, at a high enough margin, to grow into the multiple.

Catalysts

The most recent catalyst was the second-quarter fiscal 2026 report, where revenue of about $4.56 billion came in just shy of the $4.59 billion consensus, but the more important development was that management raised fiscal 2026 adjusted EPS guidance on stronger margins and robust industrial-automation and software demand. Emerson also announced 2028 targets of $21 billion in net sales and a 30 percent adjusted segment EBITA margin, framing the multi-year path. The next quarterly print and order-trend commentary are the tests of whether automation demand is accelerating into those targets.

The structural catalyst is the AspenTech integration. Emerson completed the buyout of AspenTech's outstanding minority at $265 per share, a $7.2 billion transaction, consolidated it into the Control Systems and Software segment, and delivered $200 million of run-rate cost synergies alongside the Test and Measurement integration. Progress on software growth and synergy realization is the swing factor for whether the premium multiple holds. Capital return is the steady catalyst: a 69-year dividend-growth streak at a conservative payout near 34 percent and a plan to return $10 billion to shareholders by 2028. Watch analyst repositioning, where the median target sits near $153 with bulls like Bernstein at $175 and Evercore at $185 against more cautious initiations, and watch process-automation capital-spending trends across energy, chemicals, and life sciences end markets.

Sources: StockTitan EMR Q2 2026 10-Q, Simply Wall St upgraded 2026 EPS, AspenTech tender offer, Sure Dividend EMR aristocrat.

Peer Cohorts (Per Segment, With Filing Citations)

Final Control / Measurement & Analytical (reported)

Discrete Automation (reported)

Safety & Productivity (reported)

Control Systems & Software (reported)

Test & Measurement (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive EMR report on boothcheck