3 Companies I Love Whose Valuations Terrify Me

There are great companies, and there are great stocks. The two are often the same, but in the case of 3D engineering and design software company Autodesk (NASDAQ: ADSK), automation company Rockwell Automation (NYSE: ROK), and universal lubricant company WD-40 (NASDAQ: WDFC), a great company is matched with a not so great valuation. All three trade on sky-high valuations and have some aggressive-looking earnings targets to meet in order to make them a good value.

Let's take a look at WD-40's enterprise value (market cap plus net debt), or EV, to earnings before interest, taxation, depreciation and amortization (EBITDA) multiple. Simply stated, EV-to-EBITDA. It's a useful metric that includes an appreciation for debt levels.

There's no way around the fact that all three of the above-mentioned companies trade on hefty absolute valuations, and WD-40 has a particularly high rating compared to its historical performance.

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Source Fool.com