I published an article on Seeking Alpha on Eaton (ETN), a strong electrification giant powering its way through data centers. I own the stock and plan to hold it for a few years expecting a return of 15 to 20% per year. Eaton stands out as an electrification powerhouse with a robust track record, and is foundational to the industrial buildout supporting AI and data center development. Its two other sectors, Aerospace and Global Electrification, are also doing well.

Investment case:

Reasonable valuation:

The valuation is still pretty reasonable at a P/S ratio of just 4.9, with a forecasted 10.7% CAGR for the next four years, based on Seeking Alpha consensus estimates. That translates to a P/S Growth ratio of just 0.45 for 2026 and a P/S ratio of 4.9 based on the 4-year revenue CAGR of 11%, in line with large data center infrastructure industrial suppliers, such as Vertiv Holdings Co (VRT) and Amphenol Corporation (APH).

The company has a lot of depth:

Another strong, convincing reason to buy Eaton is that this is not a one-trick data center pony; the aerospace strength and decades of market leadership in electrification are a huge competitive advantage and will always find a premium multiple. These industries are difficult to scale and require enormous specialization.

Asset Light, good cash generation:

Eaton has generated an operating cash flow of about 16% of revenues in the past few years. Last year, it generated $4.5Bn in operating cash and spent only $919Mn in Capex, which is excellent for a $32Bn company entering into a robust growth phase.

You can read the entire article here.