Financial statement analysis and common stock valuation

Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

• Rates of Return
• Variance and Covariance
• Systematic Risk (β) Estimation
• Expected Rate of Return

Analysis of Long-term (Investment) Activity Ratios
Quarterly Data

Measures how efficiently Eaton Corp. plc generates revenues from its investments in fixed or total assets.

• Long-term Activity Ratios (Summary)
• Net Fixed Asset Turnover
• Total Asset Turnover
• Equity Turnover

Analysis of Short-term (Operating) Activity Ratios
Quarterly Data

Evaluates revenues and output generated by the Eaton Corp. plc assets. Operating performance ratios describe the relationship between the Eaton Corp. plc level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle

Balance Sheet: Assets
Quarterly Data

The assets reports major classes and amounts of resources owned or controlled by Eaton Corp. plc.

Present Value of Free Cash Flow to Equity (FCFE)

The FCFE valuation approach estimates the value of equity as the present value of future FCFE discounted at the required rate of return on equity.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• FCFE Growth Rate (g)

Analysis of Liquidity Ratios
Quarterly Data

Measures the adequacy of a Eaton Corp. plc cash resources to meet its near-term cash obligations.

• Liquidity Ratios (Summary)
• Current Ratio
• Quick Ratio
• Cash Ratio

Analysis of Long-term (Investment) Activity Ratios

Measures how efficiently Eaton Corp. plc generates revenues from its investments in fixed or total assets.

• Long-term Activity Ratios (Summary)
• Net Fixed Asset Turnover
• Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
• Total Asset Turnover
• Equity Turnover

Common Stock Valuation Ratios
Quarterly Data

Relative valuation technique determine the value of Eaton Corp. plc by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)

Price to FCFE (P/FCFE)

Free cash flow to equity is the cash flow available to Eaton Corp. plc equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made.

• Free Cash Flow to Equity (FCFE)
• P to FCFE Ratio, Current
• P to FCFE Ratio, Historical

Analysis of Profitability Ratios

Measures the income of Eaton Corp. plc relative to its revenues and invested capital.

• Profitability Ratios (Summary)
• Gross Profit Margin
• Operating Profit Margin
• Net Profit Margin
• Return on Equity (ROE)
• Return on Assets (ROA)

Aggregate Accruals

Financial reporting quality relates to the accuracy with which Eaton Corp. plc reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Eaton Corp. plc earnings.

• Balance-Sheet-Based Accruals Ratio
• Cash-Flow-Statement-Based Accruals Ratio

Statement of Comprehensive Income

Comprehensive income is the change in equity (net assets) of Eaton Corp. plc during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.