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Where Is SWK Trading Compared to Peers?

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Mar. 17 2017, Updated 9:06 a.m. ET

Stanley Black & Decker’s forward price-to-earnings

On March 15, 2017, Stanley Black & Decker’s (SWK) was trading at a one-year forward PE (price-to-earnings) multiple of 18.30x, as compared to its industrial peers General Electric (GE), Honeywell (HON), and United Technologies (UTX), which are trading at one-year forward PE multiples of 17.7x, 17.80x, and 17.0x, respectively.

We should note that the forward PE ratio is a relative valuation method that considers the company’s future earnings for calculation. The forward PE ratio tells how much investors are paying for a stock per dollar of expected earnings over the next 12 months.

The forward PE ratio is one of the most popular valuations tools because it helps investors compare two or more companies that operate in the same industry and to see which stock is overvalued or undervalued.

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Stanley Black & Decker marginally ahead of its peers

Stanley Black & Decker is marginally trading at a premium in comparison to peers. Over the past four years, SWK’s revenue has been growing, with the exception of 2015. By comparison, the revenues of GE have seen a decline and HON’s revenue has remained range bound. SWK’s revenue growth is expected to get a boost from the recently completed acquisitions of the Craftsman brand from Sears and the tools business from Newell.

SWK expects its 2017 earnings per share to be in the range of $6.85–$7.05, which would be a ~7% rise over the previous year. All these factors have caused the stock to trade at a premium compared to peers.

Notably, if you’re looking for exposure to SWK through ETFs, you can invest in the First Trust Industrials/Producer Durables AlphaDEX Fund ETF (FXR), which had 1.1% of its portfolio in SWK on March 14, 2017.

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