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Dividend Stocks

Is Honeywell Stock Undervalued or Overvalued Before Earnings?

Honeywell (NYSE: HON) is a large cap company that operates within the industrial conglomerates industry. Its market cap is $104 billion today, and the total one-year return is 16.84% for shareholders.

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Honeywell stock is beating the market, and it reports earnings on Friday. But does that make it a good buy today? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company using data from Bloomberg LP.

Our system looks at six key metrics…

Earnings-per-Share (EPS) Growth: Honeywell reported a recent EPS growth rate of 10.13%. That’s below the industrial conglomerates industry average of 72.06%. That’s not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the industrial conglomerates industry is 19.67. And Honeywell’s ratio comes in at 18.92. It’s trading at a better value than many of its competitors.

Debt-to-Equity: The debt-to-equity ratio for Honeywell stock is 77.48%. That’s below the industrial conglomerates industry average of 170.31%. The company is less leveraged.

Free Cash Flow per Share Growth: Honeywell’s FCF has been higher than that of its competitors over the last year. That’s good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

Profit Margins: The profit margin of Honeywell comes in at 13.97% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Honeywell’s profit margin is above the industrial conglomerates average of 11.52%. So that’s a positive indicator for investors.

Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Honeywell is 25.35%, and that’s above its industry average ROE of 11.67%.

Honeywell stock passes five of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Strong Buy.*


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Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing.

 

*The views and opinions expressed in this piece are those of the author and do not necessarily reflect the position of professional analysts.


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