While the S&P 500 is up 14.3% since June 2025, Emerson Electric (currently trading at $136.12 per share) has lagged behind, posting a return of 8.4%. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Emerson Electric, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Is Emerson Electric Not Exciting?
We're swiping left on Emerson Electric for now. Here are three reasons there are better opportunities than EMR and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Emerson Electric’s 1.4% annualized revenue growth over the last five years was weak. This was below our standards.
2. Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Emerson Electric’s margin dropped by 3 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Emerson Electric’s free cash flow margin for the trailing 12 months was 13.5%.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Emerson Electric’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Emerson Electric isn’t a terrible business, but it doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 21.2× forward P/E (or $136.12 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward our favorite semiconductor picks and shovels play.
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