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Today, January 8, I made Johnson Controls stock pick #9 in my Special Report: 12 Bargain Stock Picks NOW on my subscription site.

If you haven’t looked at Johnson Controls in a while, but you used to follow the stock, today even a glance will show you an extremely different company.

Johnson Controls had long been viewed as an automotive seats and interiors maker. Justly because two-thirds of its revenue came from auto companies. That business got spun off in 2016 (that company is Adient now) after Johnson Controls merged with Tyco to add security and  fire-protection products and services. The last of Johnson Controls’ old three-legged structure, the company’s battery business, was sold in 2019.

That’s left a company concentrated in building environmental and security services.

In essence Johnson Controls has gone from being a cyclical auto supplier of parts to a higher growth business less subject to economic swings as it rides global trends in smart buildings and in demand for greater energy efficiency–with an increased share of revenue coming from services, which produce much more stable revenues.

And the company also took in a lot of cash in these deals. The sale of the battery business provided $11.6 billion. Johnson Controls used $3.4 billion of that to reduce its outstanding debt and another $4.1 billion to repurchase 104 million shares (about 10% of outstanding shares.) In 2020 Johnson Controls plans to buy back another $2 billion in shares. The balance sheet now shows a net debt to 2020 EBITDA (earnings before interest, taxes, depreciation and amortization) of just 1.2. And the company will have $1 billion in cash for bolt-on acquisitions to its building management business.

That business itself looks to be in good shape with a 2020 backlog that’s up 8% to $8.9 billion. And projections for low to mid-single digit organic revenue growth. The company expects its adjusted EBIT margin to climb 60 to 80 basis points in the year to 11% to 11.2% and forecasts adjusted earnings per share of $2.50 to $2.60. (The company forecasts additional cost-synergies in 2020 from all this structural work.) That would be 28% to 33% year over year earnings per share growth.

And yet, the stock still trades today, January 8, with a trailing 12-month price to earnings ratio of just 6.33 and a forward price to earnings ratio on projected earnings of just 15.22.

I think that is the result of many traders and investors still valuing Johnson Controls as a cyclical auto supply company with big exposure to the auto industry in China.

Morningstar calls these shares about 15% undervalued. I think that valuation is itself undervalued and I’d put the discount at the January 8 closing price of $41.08 at more like 25%.

The stock also pays a 2.55% dividend.

Johnson Controls is a member of my long-term 50 Stocks Portfolio. The shares are up 250.81% since December 30, 2008.