Eaton has the Financial Strength Rank of 6.
GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors:
1. The debt burden that the company has as measured by its
Interest Coverage (current year). The higher, the better.
2. Debt to revenue ratio. The lower, the better.
3.
Altman Z-Score.
Eaton's Interest Coverage for the quarter that ended in Jun. 2022 was 22.94.
Eaton's debt to revenue ratio for the quarter that ended in Jun. 2022 was 0.48.
As of today, Eaton's Altman Z-Score is 3.06.
Competitive Comparison
For the Specialty Industrial Machinery subindustry, Eaton's Financial Strength, along with its competitors' market caps and Financial Strength data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Eaton Financial Strength Distribution
For the Industrial Products industry and Industrials sector, Eaton's Financial Strength distribution charts can be found below:
* The bar in red indicates where Eaton's Financial Strength falls into.
Eaton Financial Strength Calculation
GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors
A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.
1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.
Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.
Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:
Eaton's Interest Expense for the
months ended in Jun. 2022 was $-31 Mil. Its Operating Income for the
months ended in Jun. 2022 was $711 Mil. And its Long-Term Debt & Capital Lease Obligation for the quarter that ended in Jun. 2022 was $6,663 Mil.
Eaton's Interest Coverage for the quarter that ended in Jun. 2022 is
The higher the ratio, the stronger the company's financial strength is.
2. Debt to revenue ratio. The lower, the better.
Eaton's Debt to Revenue Ratio for the quarter that ended in Jun. 2022 is
3. Altman Z-Score.
Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.
The zones of discrimination were as such:
When Z-Score is less than 1.81, it is in Distress Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey Zones.
Eaton has a Z-score of 3.06, indicating it is in Safe Zones. This implies the Z-Score is strong.
Good Sign:
Altman Z-score of 3.06 is strong.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
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