The stock runup makes United Technologies a dicey investment. True, we have seen that United Technologies, for all its blotches, has been a pretty strong company over the long term. It is therefore natural that its stock should fetch higher valuations than the doormats of the cyclical category--companies such as the Big Three automakers, the big steel producers, and consumer-electronics makers.
As with most cyclicals, though, it's only a matter of time before the bottom falls out from under United Technologies' profits. True, the company's P/E ratio of 19 at the end of 1999 was lower than that of the S&P 500, and even though it also had a P/E of 19 in 1995, it had actually fallen relative to the index. But a closer look at the stock's valuations shows that United Technologies is riskier than it might first appear.
How Expensive Is the Company Based on Normalized Earnings? >>