ACUITY INC. (AYI): what the price requires
At today's price, ACUITY INC. (AYI) is priced for +15.3% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-13 · Source: https://boothcheck.com/report/AYI
Headline
| Field | Value |
|---|---|
| Ticker | AYI |
| Company | ACUITY INC. |
| Current price | $326.10/sh |
| Composition | ABL: Independent sales network 61% / ABL: Direct sales network 9% / ABL: Retail sales 4% / ABL: Corporate accounts 4% / ABL: OEM and other 5% / AIS 18% / Eliminations -1% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 11.7% |
| Operating margin today | 13.7% |
| Margin compression implied | -2.0pp |
| Implied growth | 15.3% |
| Multiple paid | 16x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 10.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.4pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.43σ |
| cohort percentile (of 210 peers) | 42 |
| sustained it ~5 years at this level | 50% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.84x | 5 | expensive |
| Earnings | 1.69x | 5 | expensive |
| Relative | 1.05x | 5 | expensive |
| Growth | 0.77x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.6%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $569.53 | 0.57x | yes | FCF base $0.7B, growth 11% (input: historical growth), terminal g 4.0%, WACC 8.6%, 6yr projection |
| DCF Exit Multiple | Growth | $422.04 | 0.77x | yes | Exit EV/EBITDA: 10.6x / 12.6x / 14.6x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $307.21 | 1.06x | yes | P/E 18x (sector median), scenarios: 15.0x / 18.0x / 21.0x (bear / base = sector held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $164.95 | 1.98x | yes | BV/sh $92.12, ROE (TTM) 16.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $217.87 | 1.50x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $288.50 | 1.13x | yes | Rev $4.6B, growth 11% (input: historical growth; tapered), Terminal P/S: 1.8x / 2.2x / 2.6x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $309.37 | 1.05x | yes | EPS $15.08, growth 21% (input: historical EPS growth), PEG=1.04 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $144.88 | 2.25x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.56B × (1−24%) / WACC 8.6% → EPV (no growth) |
| Residual Income | Asset | $220.22 | 1.48x | yes | BV $92.12 + 5yr PV of (ROE (TTM) 16.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $176.80 | 1.84x | yes | √(22.5 × EPS $15.08 × BVPS $92.12) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $309.67 | 1.05x | yes | EBITDA $0.83B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $210.64 | 1.55x | yes | FCF $639.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $193.07 | 1.69x | yes | SBC-adj FCF $0.59B (FCF $0.64B − SBC $0.05B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $486.58 | 0.67x | yes | EPS $15.08 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $48.47 | 6.73x | yes | BV $92.12 × (ROIC 4.5% / WACC 8.6%) |
| P/Sales Sector | Relative | $372.04 | 0.88x | yes | Revenue $4.61B × sector P/S 2.5x |
| PEG Fair Value | Relative | $464.06 | 0.70x | yes | EPS $15.08 × (PEG 1.5 × growth 20.5% (input: historical EPS growth)) → PE 30.8x |
| Earnings Yield | Earnings | $163.03 | 2.00x | yes | EPS $15.08 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $385.4m |
| Net debt / NOPAT (after-tax) | 0.81x |
| Net debt / operating income (pre-tax) | 0.62x |
| Interest coverage | 15.1x |
| Share count CAGR (buyback) | -2.6% |
| Burning cash | no |
Bullet Takeaways
At $317.26 Acuity trades near 16x company-wide operating income, implying roughly 14.7% operating growth a year for five years. Only the growth DCF reaches the price; asset, earnings-power, and peer-multiple frames say richly valued, the signature of a durability premium.
The mix shift is the story. Q2 fiscal 2026 net sales rose 4.9% to $1.1 billion, but the Intelligent Spaces segment jumped 44.7% to $248 million with operating margin up 560 basis points, while the larger lighting segment declined 2.8% on improved margin. Adjusted EPS of $4.14 beat.
The balance sheet is clean, with net debt near $385 million at about 0.6x operating income and interest coverage near 14x. The bet is that the high-growth Intelligent Spaces business and lighting-margin discipline compound through a flat-to-down lighting demand cycle.
Bull Case
The loudest concern on Acuity is that its core lighting business is shrinking: Acuity Brands Lighting net sales fell 2.8% in Q2 fiscal 2026, and management now guides full-year lighting sales to flat-to-down low single digits. The bear reads a declining core as a value trap dressed in a growth multiple. The question is whether the data supports that fear or undercuts it, and the data points the other way.
The shrinkage is being more than offset by mix and margin. Even as lighting volumes softened, Acuity Brands Lighting adjusted operating margin rose to 17.3% on cost actions and favorable mix, so the segment is earning more on less, which is the opposite of a value trap. Total Q2 net sales still grew 4.9% to $1.1 billion, operating income reached $133 million at a 12.6% margin, and adjusted diluted EPS of $4.14 beat expectations while GAAP diluted EPS rose 26.1% to $3.09. A company growing earnings sharply while its legacy volume dips is demonstrating pricing power and operational discipline, not decline.
The growth engine is Intelligent Spaces. The AIS segment jumped 44.7% to $248.1 million with operating margin up 560 basis points to 11.4%, and management still guides it to low-to-mid-teens growth for the year. AIS is the building-management and spaces-intelligence software and controls business, a higher-margin, faster-growing layer that is reshaping the mix away from commodity fixtures. The FY2025 10-K discusses the integration and charges that accompany that strategic build, the disclosure base behind a deliberate shift toward intelligent systems. With the price implying about 14.7% operating growth and a clean balance sheet (net debt near 0.6x operating income, interest coverage near 14x), Acuity is funding the transition from strength. The bet is that AIS growth plus lighting-margin discipline compounds through the demand cycle, and the recent results show both halves working at once.
Bear Case
Look at how the earnings growth is being manufactured, because the gap between GAAP and adjusted figures is the tell. Q2 fiscal 2026 GAAP diluted EPS was $3.09 while adjusted diluted EPS was $4.14, a difference of more than a dollar a share, or roughly a quarter of reported earnings, stripped out as adjustments. Acuity has grown partly through acquisitions, particularly to build the Intelligent Spaces business, and the FY2025 10-K notes that such deals may result in additional non-cash charges and administrative costs. When a company leans on a wide adjusted-to-GAAP spread and acquisition-driven segment growth, the bear reads the headline EPS with caution, because the durable, organic earnings power is the smaller GAAP number.
The valuation assumes the rosier read holds. At $317.26 (June 27, 2026) only the growth DCF reaches the price. Every static frame says richly valued: the simple excess-return mark lands near $148, earnings power value near $140, the Graham number near $167, the FCF-yield mark near $175, and ROIC-justified book near $33 because accounting ROIC sits around 3.1% against an 8.6% WACC. The relative P/E mark near $267 is the closest static method and still short of the price. When the conservative frames cluster between $140 and $267 against a $317 quote, the premium rests on the 14.7% growth assumption continuing, and that assumption leans heavily on AIS sustaining 40%-plus growth rates that naturally decelerate as the base gets larger.
The core-demand reality limits the cushion. Acuity Brands Lighting, still roughly two-thirds of revenue, is guided flat-to-down, and lighting demand tracks nonresidential construction and renovation, which softens when rates stay high. The current lighting margin near 17% reflects cost actions and mix that cannot expand indefinitely, so once those levers are exhausted, a flat-to-down core drags on the total. Share count has shrunk at roughly 3% a year through buybacks, flattering per-share growth without changing the underlying return on capital. The bet the price makes is that AIS keeps compounding at high-double-digit rates, lighting margins hold, and the adjusted earnings prove durable. If AIS growth decelerates as it scales, if lighting demand weakens further, or if the adjustments mask softening organic economics, the conservative frames, all well below the price, are where the stock would re-rate.
Valuation
Inverting the $317.26 price gives the anchor. At that level the market pays about 16x company-wide operating income, which under a 10.1% cost of capital and 4% terminal growth implies operating growth of roughly 14.7% a year for five years. Each one-point change in the cost of capital moves the implied growth by about 6.3 points. Against Acuity's own record that pace is within reach given the AIS contribution, so the priced-in assumption reads as within range. The reverse-DCF range runs from a low near $251 to a base near $275.
The model X-ray shows the durability-premium split. Only the growth frames reach the price: a perpetual-growth DCF near $574 on 16% FCF growth, a DCF exit-multiple near $444, and a discounted future market cap near $315 that sits right at the quote. The relative P/E mark lands near $267, EV/EBITDA relative near $247, and the Ben Graham formula near $223. The asset and earnings frames are lower: earnings power value near $140, simple excess return near $148, the Graham number near $167, FCF yield near $175, and ROIC-justified book near $33.
The spread is the information. The price is not a verdict on whether Acuity is a good operator, the margin discipline and AIS growth say it is executing well. It is a measure of how much continued double-digit compounding the market has booked, much of it dependent on the Intelligent Spaces segment sustaining a growth rate that mathematically slows as it scales.
Catalysts
The near-term driver is the segment divergence against guidance. Q2 fiscal 2026 net sales rose 4.9% to $1.1 billion with adjusted EPS of $4.14 beating, but the story is the split: Intelligent Spaces up 44.7% to $248 million versus Acuity Brands Lighting down 2.8%. Management guides lighting to flat-to-down low single digits and AIS to low-to-mid-teens growth, with no change to overall EPS guidance. Whether AIS sustains its growth and lighting holds margin is the swing factor.
The structural catalyst is the mix shift toward Intelligent Spaces. AIS operating margin improved 560 basis points to 11.4%, and continued share gains in building-management and spaces-intelligence systems would keep reshaping the company toward higher-margin, faster-growing revenue. Deceleration as AIS scales is the watch item.
The broader driver is nonresidential construction and renovation demand for the lighting core. Watch lighting volume and margin trends, AIS growth durability, the cadence of share repurchases supporting EPS, the adjusted-to-GAAP earnings spread, and any acquisition activity in the Intelligent Spaces buildout.
Sources: Acuity Q2 fiscal 2026 earnings release and StockTitan (Q2 net sales $1.1B up 4.9%, adjusted EPS $4.14, GAAP EPS $3.09 up 26.1%, AIS up 44.7% to $248.1M with margin up 560bps, ABL down 2.8% at 17.3% adjusted margin), AlphaStreet and Yahoo Finance earnings call (FY2026 guidance: ABL flat to down low single digits, AIS low-to-mid-teens, no change to EPS guidance).
Peer Cohorts (Per Segment, With Filing Citations)
Acuity Brands Lighting (ABL) (reported)
- HUBB (HUBBELL INC)
- (no filing in the citation store)
- NVT (nVent Electric plc)
- (no filing in the citation store)
- ATKR (Atkore Inc.)
- (no filing in the citation store)
Acuity Intelligent Spaces (AIS) (reported)
- JCI (JOHNSON CONTROLS INTERNATIONAL PLC)
- (no filing in the citation store)
- HON (Honeywell International Inc)
- (no filing in the citation store)
- CARR (CARRIER GLOBAL CORPORATION)
- (no filing in the citation store)
- ALLE (Allegion plc)
- (no filing in the citation store)
- ROK (Rockwell Automation, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.