ROK Rockwell Automation
Sticky factory-automation franchise with real switching costs, but the price already assumes a boom decade it can't deliver.
The business
Rockwell sells the programmable logic controllers, sensors, software, and services that run factories. Its Logix/FactoryTalk platform is embedded in tens of thousands of plants, generating hardware sales upfront and recurring revenue from software, spare parts, and lifecycle services thereafter. Revenue tracks manufacturing capex cycles, especially autos and consumer goods.
Quality gate · 80/100
Moat & management
| Moat | narrow moat |
| Source | switching costs |
| Trajectory | stable |
| Management | adequate |
Ripping out a control platform woven into plant code, spare parts, and trained engineers is costly and risky, which sustains Rockwell's 54% gross margins and mid-teens ROIC. But Siemens, Schneider, and cloud-native software entrants are attacking the IT/OT boundary, and the moat is strongest in North American discrete automation rather than globally — wide in its niche, narrow overall.
Steady buybacks (-0.8% share CAGR), modest leverage at 1.8x, and a long dividend-growth streak show owner orientation, but serial software acquisitions (Plex, Fiix) at rich multiples have added little measured return so far.
Owner-earnings inputs
| Owner earnings (TTM) | 1.30B |
| Owner-earnings yield | 2.8% |
| Free-cash-flow yield | 3.2% |
| Growth used (normalized) | 6.0% |
| Market-implied growth (reverse DCF) | 24.0% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 11.8% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 1.37B | 6.0% | 1.23B |
| 2 | 1.45B | 5.8% | 1.16B |
| 3 | 1.53B | 5.6% | 1.10B |
| 4 | 1.62B | 5.4% | 1.04B |
| 5 | 1.70B | 5.1% | 973.95M |
| 6 | 1.78B | 4.9% | 914.27M |
| 7 | 1.87B | 4.7% | 856.49M |
| 8 | 1.95B | 4.5% | 800.71M |
| 9 | 2.04B | 4.3% | 747.04M |
| 10 | 2.12B | 4.1% | 695.53M |
| 11 | 2.20B | 3.9% | 646.24M |
| 12 | 2.28B | 3.6% | 599.21M |
| 13 | 2.36B | 3.4% | 554.45M |
| 14 | 2.43B | 3.2% | 511.97M |
| 15 | 2.51B | 3.0% | 471.76M |
Key risks
- Deep cyclicality: earnings levered to manufacturing capex, autos in particular — a capex winter crushes the growth rate
- Software-defined automation and cloud/IT-OT entrants commoditizing the control layer over a decade
- Secularly slow top line: 5-year revenue CAGR of just 2.4% despite a reshoring boom
- Price pays for ~24% growth; even good execution loses money for buyers here
Catalysts
- Reshoring of US manufacturing and grid/electrification capex
- Labor scarcity pushing automation adoption across mid-market plants
- Software and services mix shift lifting margins on the installed base
Recent news
score · 8 articles
- Is Teradyne Stock Asking Too Much Of Its Test Business?
- Is Rockwell Automation Stock Outperforming the S&P 500?
- KE vs. ROK: Which Stock Is the Better Value Option?
- Eaton to Boost U.S. Power Capacity With $242M Arkansas Plant
- Q2 Earnings Highlights: Rockwell Automation (NYSE:ROK) Vs The Rest Of The Internet of Things Stocks
- Rockwell Automation (ROK) Stock May Be 18% Overvalued On Cash Flow And Earnings
- Did Rockwell’s New AI-Driven Support and Cybersecurity Suite Just Shift Rockwell Automation's (ROK) Investment Narrative?
- KE or ROK: Which Is the Better Value Stock Right Now?
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~24%/yr owner-earnings growth over 15y (reverse DCF); model credits 6%. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.