Is Schneider Electric (ENXTPA:SU) Still a Buy at Its Current Valuation?

Schneider Electric (ENXTPA:SU), a global leader in energy management and automation, has long been celebrated for its innovation in industrial and digital infrastructure. However, as of October 2025, the company's valuation multiples-particularly its P/E ratio of 33.42 (TTM)-have raised questions about whether its stock remains a compelling buy. This analysis evaluates the balance between Schneider's strong historical growth, cutting-edge digital investments, and the risks posed by stretched valuation metrics and margin pressures.

Innovation as a Growth Engine

Schneider's recent foray into 800 VDC power systems for next-generation data centers and AI infrastructure underscores its commitment to staying ahead of technological trends. Collaborating with NVIDIA, the company is developing a 1.2 MW sidecar solution to address the surging demand for high-power-density AI factories, as highlighted in an AIJourn report. This innovation aligns with the global shift toward AI-driven economies and positions Schneider as a critical player in the digital infrastructure value chain.

Moreover, the company's investment in Bengaluru, India-Rs 1,520.75 crore to create 550 jobs-highlights its strategic focus on scaling digital capabilities in growth markets, according to the Economic Times. Such investments not only bolster long-term revenue streams but also reinforce Schneider's reputation as a sustainability leader, a factor that continues to attract ESG-focused investors.

Valuation Metrics: Stretched or Justified?

Schneider's current P/E ratio of 33.42 (TTM) exceeds the electrical equipment industry average of 26.29, according to FullRatio's industry PE data, suggesting investors are paying a premium for its growth prospects. While this premium is partly justified by its innovation pipeline, it raises concerns about whether the stock is overvalued relative to historical trends. For context, the company's P/E ratio has fluctuated significantly over the past decade, peaking at 32.26 in 2025 compared to 15.18 in 2018, per Macrotrends.

The P/B ratio of 4.18 further indicates a premium to book value, though it remains slightly below the industry average of 4.45, per Eqvista. However, the absence of a clear P/S ratio for the sector complicates a direct comparison. If Schneider's revenue growth continues to outpace peers-Schneider recorded 8% organic growth in Q2 2025, as shown in Schneider's quarterly results-the P/S premium could become more defensible.

Margin Trends and Economic Headwinds

Despite robust revenue growth, Schneider's operating margin trends reveal mixed signals. The adjusted EBITA margin in H1 2025 stood at 18.2%, down slightly from earlier guidance of 19.2%–19.5% due to foreign exchange headwinds and macroeconomic volatility, according to a Reuters report. While this dip is modest, it highlights the company's vulnerability to global economic shifts.

Comparatively, peers like Eaton Corporation (ETN) and Emerson Electric (EMR) trade at P/E ratios of 37.86 and 28.47, respectively, according to FinanceCharts, suggesting Schneider is valued more conservatively relative to its competitors. However, its EBITA margin of 18.6% in Q4 2024-exceeding forecasts-demonstrates resilience in high-growth segments like data centers, as noted in a Finimize article.

Risk vs. Reward: A Balanced Outlook

The key question for investors is whether Schneider's innovation investments will translate into sustainable margin expansion. The company's 2021-25 Sustainability Impact program, nearing completion, has already driven cost efficiencies and brand equity. However, sustaining these gains in a high-interest-rate environment will require disciplined capital allocation.

Schneider's Free Cash Flow of €0.5 billion in H1 2025 provides flexibility to fund R&D and shareholder returns, per the company's quarterly results, but rising input costs and FX volatility could pressure margins in 2026. Investors should monitor the company's ability to maintain its EBITA margin above 18% while scaling AI infrastructure solutions.

Conclusion

Schneider Electric remains a compelling long-term play for investors who value innovation and sustainability. Its 800 VDC power systems and digital automation investments position it to capitalize on the AI revolution, while its EBITA resilience in Q4 2024 demonstrates operational strength. However, the current P/E ratio of 33.42 suggests the market is pricing in aggressive growth assumptions. For the stock to justify this premium, Schneider must deliver consistent margin expansion and outperform industry peers in high-margin digital services.