ACUITY INC. (AYI): what the price assumes
In the published model solve dated 2026-Q2, anchored at $335.16, ACUITY INC. (AYI) is priced for +13.3% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.
Generated: 2026-08-30 · Source: https://boothcheck.com/report/AYI
Headline
| Field | Value |
|---|---|
| Ticker | AYI |
| Company | ACUITY INC. |
| Sector / Industry | Consumer Cyclical |
| Current price | $335.16/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 Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 11.7% |
| Operating margin today | 14.5% |
| Margin compression (value-band) | -2.8pp |
| Implied growth | 13.3% |
| Multiple paid | 16x operating income |
The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 9.9% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | +0.27σ |
| cohort percentile (of 212 peers) | 43 |
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 | 1.86x | 5 | expensive |
| Earnings | 1.68x | 5 | expensive |
| Relative | 0.90x | 2 | justifies |
| 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=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $589.37 | 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 | $434.65 | 0.77x | yes | Exit EV/EBITDA: 11.3x / 13.3x / 15.3x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | — | — | no | P/E 18x (static sector reference · 2026-04), scenarios: 15.0x / 18.0x / 21.0x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $170.56 | 1.97x | yes | BV/sh $95.25, ROE (TTM) 16.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $225.29 | 1.49x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $296.52 | 1.13x | yes | Rev $4.6B, growth 11% (input: historical growth; tapered), Terminal P/S: 1.8x / 2.2x / 2.5x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $309.37 | 1.08x | yes | EPS $15.08, growth 21% (input: historical EPS growth), PEG=1.04 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $149.88 | 2.24x | 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 | $227.71 | 1.47x | yes | BV $95.25 + 5yr PV of (ROE (TTM) 16.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $179.78 | 1.86x | yes | √(22.5 × EPS $15.08 × BVPS $95.25) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | EBITDA $0.79B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $217.80 | 1.54x | yes | FCF $639.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $199.64 | 1.68x | yes | SBC-adj FCF $0.59B (FCF $0.64B − SBC $0.05B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $486.58 | 0.69x | yes | EPS $15.08 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $50.14 | 6.68x | yes | BV $95.25 × (ROIC 4.5% / WACC 8.6%) |
| P/Sales Sector | Relative | — | — | no | Revenue $4.61B × sector P/S 2.5x |
| PEG Fair Value | Relative | $464.06 | 0.72x | yes | EPS $15.08 × (PEG 1.5 × growth 20.5% (input: historical EPS growth)) → PE 30.8x |
| Earnings Yield | Earnings | $163.03 | 2.06x | 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 | — |
Economic-Unit Decomposition (Sum Of The Parts)
One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.
| Unit | Role | Valuation basis | Revenue | Reported profit | Value evidence | Status |
|---|---|---|---|---|---|---|
| Acuity Brands Lighting (ABL) | operating | enterprise | $3.6b | $590.6m operating-income | withheld | unresolved no unit value |
| Acuity Intelligent Spaces (AIS) | operating | enterprise | $764.3m | $76.1m operating-income | withheld | unresolved no unit value |
No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.
Solvency
| Field | Value |
|---|---|
| Net debt | $385.4m |
| Net debt / NOPAT (after-tax) | 0.76x |
| Net debt / operating income (pre-tax) | 0.58x |
| Interest coverage | 18.0x |
| Share count CAGR (buyback) | -2.6% |
| Burning cash | no |
Bullet Takeaways
- Sixty-one percent of revenue reaches this company through independent sales agents rather than its own salespeople, a distribution structure that keeps fixed costs low and puts the customer relationship one step away from the manufacturer.
- The growth is arriving through the smaller half of the business: the intelligent-spaces segment lifted operating profit to $76.1 million (10.0% of AIS net sales) in fiscal 2025 from $43.6 million a year earlier, and grew net sales 14.9% in the quarter ended May 2026.
- The risk sits in the arithmetic of the last quarter: net sales rose 1.6% while operating profit rose 38.3%, which means nearly all the profit growth came from margin rather than volume, and margin expansion has a ceiling that volume does not.
Bull Case
The case against a lighting company writes itself, so start there. Light fixtures are a mature product in a construction-cycle industry, the technology transition that once justified premium pricing finished years ago, and the filing itself concedes exposure on both fronts: demand depends on General business, political, and economic conditions, including the strength of the construction and related markets, while Technological developments and increased competition could affect our operating profit margins and sales volume. The neighbours prove the fear is not theoretical. ATKR, an electrical products manufacturer of comparable size, is running a 1.3% operating margin on revenue that shrank 3.4% over the year.
Now look at what this company actually did. In the quarter ended May 2026, net sales grew 1.6% and operating profit grew 38.3%, to $193.3 million. A commoditising business does not do that. Something in the mix is changing faster than the market for lighting is.
That something has a name and a segment. Acuity Intelligent Spaces sells building controls, audio and video platforms, and the software that ties them together, and it now runs at roughly a fifth of revenue while growing several times faster than the lighting side. Its operating profit reached $76.1 million (10.0% of AIS net sales) in fiscal 2025 against $43.6 million the year before, helped by the QSC acquisition, which contributed $428.6 million in sales in its first partial year. Net sales in that segment rose 14.9% in the most recent quarter. A controls-and-software attachment to a lighting installation is a different economic object from the fixture itself, and it is sold to the same building, through the same channel, at the same moment.
The channel is the second structural advantage and the one most often missed. Sixty-one percent of revenue comes through the independent sales network, agents who carry the line and are paid on what they sell. The company does not have to fund a national salaried salesforce to reach a fragmented contractor market, which is a large part of why it earns a 13.7% operating margin against ROK at 11.0% and CARR at 8.2%, despite being a fraction of their size.
The balance sheet is doing nothing dramatic, which is the point. Operating profit covers the interest bill about 15.1 times over, net debt runs at 0.62 times operating profit, and the share count has fallen about 2.6% a year over the four years to May 2026. Free cash flow ran at 639.4 million dollars against capital spending the company describes as $68.4 million and $64.0 million in property, plant, and equipment in fiscal 2025 and 2024. A business generating roughly ten times its capital budget in free cash has genuine choices, and it has been using them to buy in stock rather than to chase volume.
The honest concession is that margin expansion is finite and volume is not. But the mix shift is not a one-year effect. Every point of revenue that moves from fixtures to controls moves the blended economics permanently, and the segment doing the moving is still the smaller one.
Bear Case
Follow the money into the acquisition, because that is where this management team has placed its largest bet. QSC contributed $428.6 million in sales in its first partial year inside the company. It contributed Net sales $ 428.6 Net income (1) 14.4 on the same basis. Purchase accounting depresses a first-year contribution, and the filing is explicit that results absorbed preliminary pre-tax fair value adjustments to QSC's inventory and higher tariffs, so the low conversion is not a verdict. It is a question that the next two years answer. The point is that the largest recent use of capital has not yet demonstrated the returns the rest of the business earns, and the price is being set as though it will.
The rest of the capital allocation is unremarkable in a way that should be noticed. The dividend is a token: We paid dividends on our common stock of $20.6 million ($0.66 per share) in fiscal 2025, which against a share price above three hundred dollars is a rounding error rather than a return. Buybacks do the real work, retiring about 2.6% of the shares a year. That is a defensible policy, but it concentrates the outcome: if the acquired growth does not compound, the buyback has been retiring shares of a business the market has repriced downward, and there is no dividend underneath to cushion the holder.
The valuation requirement is where the bet becomes concrete. Today's price is consistent with company-wide operating profit compounding at roughly 15.6% a year for five years. The company has recently delivered around that pace, so the rate is not fantasy. The question is what produced it. In the most recent quarter, net sales grew 1.6% and operating profit grew 38.3%. Almost the entire gain came from earning more on each dollar of sales, not from selling more. Margin has a ceiling. A business earning a 13.7% operating margin can travel toward the roughly 20.6% that HUBB and ALLE each earn, but it cannot travel past the industry's best economics indefinitely, and once it stops, operating profit growth is capped at whatever volume growth the construction cycle allows. That has been running near two percent.
The industry itself supplies the cautionary case. ATKR, a comparably sized electrical products manufacturer, is running a 1.3% operating margin on revenue down 3.4% over the year. That is what happens in this end market when pricing rolls over, and it happens quickly, because these are manufactured goods sold through distributors who have no loyalty to a brand once the specification is written.
Tariffs are a live cost, not a hypothetical one. The company names them directly as an offset to segment profit in the last full year, and the risk factors describe how Trade wars or other governmental actions related to tariffs or international trade agreements or policies have the potential to adversely impact demand for our products, costs, customers, suppliers. A manufacturer whose profit growth currently depends on margin is precisely the manufacturer most exposed to an input cost it does not control.
Finally, the channel that is an advantage in good conditions is a dependency in bad ones. Sixty-one percent of revenue moves through independent agents who carry other lines as well. When a category commoditises, the agent's incentive is to sell whatever clears, and the manufacturer discovers that it never owned the customer relationship at all.
Valuation
What the price is asking for is not more lighting. It is more profit per unit of lighting, sustained for years. At roughly 17 times company-wide operating income, today's price is consistent with operating profit compounding at about 15.6% a year for five years, discounted at about 10%. The company has recently produced growth at that rate, which is what makes the assumption arguable rather than absurd. Whether it can produce it for five consecutive years is a different question, and the reference set is not encouraging: roughly half of businesses growing at a comparable pace kept it up for even five years. The horizon is also sensitive to the discount rate, with each percentage point of cost of capital moving the required pace by more than six points.
The methods split cleanly into two camps. The peer-multiple approaches land essentially at today's price. The forward-growth approaches land above it. Against those, the book-value-and-profitability approaches land at close to half the price, and the price stands roughly seventy percent above where the earnings-power approaches land. The pattern is the signature of a business the market believes is re-rating: what it has already earned does not support the price, and what it is expected to earn does.
The earnings-power reading is worth understanding rather than dismissing, because it explains the split. That method takes a five-year average of operating income with one-time charges added back and capitalizes it with no growth at all. It is deliberately a picture of the company standing still, and standing still is exactly what this company has stopped doing. The gap between that reading and the price is not evidence of overvaluation on its own; it is a measure of how much of the price depends on the change in mix continuing.
The mix is visible in the segment numbers. The intelligent-spaces business earned $76.1 million (10.0% of AIS net sales) in fiscal 2025 against $43.6 million the prior year, with the QSC acquisition contributing $428.6 million in sales, and lighting still supplying roughly four fifths of revenue through a network in which independent agents alone account for 61%. Company-wide the trailing operating margin is 13.7%, which sits below HUBB at 20.6% and ALLE at 20.6% and above ROK at 11.0%. The headroom that the price is capitalising is the distance between where this company sits and where the better-margin peers already are.
Downside is bounded more comfortably than the multiple suggests. Net debt of 385.4 million dollars runs at 0.62 times operating profit, operating profit covers interest about 15.1 times over, and free cash flow of 639.4 million dollars arrives against a capital budget the company puts near seventy million dollars a year. The share count has been falling about 2.6% a year. None of that makes the growth assumption right. It does mean that if the assumption proves wrong, the company has years rather than quarters to adjust, and no lender setting the timetable.
Catalysts
The fiscal third quarter, reported on June 25, 2026, contained the tension in this whole story in a single pair of numbers. Net sales rose 1.6% to about 1.2 billion dollars, an increase of 19.4 million dollars. Operating profit rose 38.3% to $193.3 million, and diluted earnings per share rose 46.2% to $4.56. Growth in the top line was close to flat; growth in the profit line was not.
The segment detail explains where it came from. Acuity Intelligent Spaces posted net sales of $303.5 million, up 14.9% on the year, while the lighting business supplied the rest at roughly flat volumes. Two quarters of that pattern would establish the mix shift as the operating story rather than a favourable comparison.
Management set full-year fiscal 2026 net sales guidance in a range of 4.7 billion to 4.9 billion dollars. The fiscal year closes at the end of August, so the fourth-quarter report due in the autumn is both the year-end print and the first look at whether the acquired controls business carries its growth rate into a second full year without the help of purchase-accounting comparisons.
Peer Cohorts (Per Segment, With Filing Citations)
Acuity Brands Lighting (ABL) (reported)
- HUBB (HUBBELL INC)
- FY2025 10-K: …connectors, anchors, bushings, enclosures, cutouts and switches. The Utility Solutions segment also offers solutions that serve The Edge of the utility infrastructure, including smart meters, communications systems, and protection and control devices. Hubbell Utility Solutions supports the electrical distribution,…
- FY2025 10-K: 2; • Ohio Brass® • Meramec® • Reliaguard® • Greenjacket® • Armorcast® • Beckwith Electric™ • Continental® • R.W. Lyall™ • Gas Breaker® • AEC™ • Ripley® • Electro Industries / Gauge Tech™ • Balestro™ • Systems Control™ • Nicor™ • DMC Power® 4 HUBBELL INCORPORATED - Form 10-K Electrical Solutions Segment Hubbell…
- NVT (nVent Electric plc)
- FY2025 10-K: …reporting segment, we completed the acquisition of ECM Investors, LLC, the parent of ECM Industries, LLC ("ECM Industries"), for approximately $ 1.1 billion in cash. ECM Industries is a leading provider of high-value electrical connectors, tools and test instruments and cable management. The purchase price was funded…
- FY2025 10-K: …original equipment manufacturers, panel builders and contractors. Our Systems Protection brands include nVent HOFFMAN, SCHROFF and TRACHTE. Electrical Connections Our Electrical Connections business provides innovative solutions that connect power and data infrastructure. Our offerings enhance end-user safety, reduce…
- ATKR (Atkore Inc.)
- FY2025 10-K: …the rate of either (x) Term SOFR (with a floor of 0 %) plus 2.00 %, or (y) an alternate base rate (with a floor of 1.5 %) plus 1.00 %. The New Senior Secured Term Loan Facility has an annual amortization rate of 1.00 %. The Company recognized a loss on extinguishment of debt related to the refinancing of the New…
- FY2025 10-K: …framing, and conveyor systems. OEM sales accounted for approximately 11.5% of our net sales for fiscal 2025. Our distribution footprint is concentrated in North America (the United States and Canada), with additional facilities in Australia, New Zealand and the United Kingdom. Seasonality In a typical year, our…
Acuity Intelligent Spaces (AIS) (reported)
- JCI (JOHNSON CONTROLS INTERNATIONAL PLC)
- FY2025 10-K: …sells, installs, and services HVAC, controls, building management, refrigeration, integrated electronic security systems, integrated fire detection and suppression systems, and digital (software) solutions for commercial, industrial, data center, institutional, and governmental customers and provides technical…
- FY2025 10-K: The Company has developed software platforms, including on-premises platforms and cloud-based software services, and integrated its products and services with digital capabilities to provide data-driven solutions to create smarter, safer and more sustainable buildings. The Company's OpenBlue platform combines the…
- HON (Honeywell International Inc)
- FY2025 10-K: …and thermal systems. Aerospace Technologies also provides spare parts, repair, overhaul, and maintenance services (principally to aircraft operators), and sells licenses or intellectual property to other parties. Honeywell Forge solutions enable customers to turn data into predictive maintenance and predictive…
- FY2025 10-K: …http://fasb.org/us-gaap/2025#AccruedLiabilitiesCurrent http://fasb.org/us-gaap/2025#OtherLiabilitiesNoncurrent http://fasb.org/us-gaap/2025#OtherLiabilitiesNoncurrent 225 492 iso4217:USD xbrli:shares iso4217:USD xbrli:shares iso4217:GBP xbrli:pure hon:position iso4217:EUR hon:tranche hon:vote hon:segment 0000773840…
- CARR (CARRIER GLOBAL CORPORATION)
- FY2025 10-K: …brands and on strengthening our long-term relationships with channel partners and customers by offering solutions that anticipate customer needs with a focus on technologies related to energy efficiency, emissions, air quality, electrification, refrigerants with lower global warming potential and noise reduction.…
- FY2025 10-K: Climate Solutions Americas ("CSA"), Climate Solutions Europe ("CSE"), Climate Solutions Asia Pacific, Middle East & Africa ("CSAME") and Climate Solutions Transportation ("CST"). Each respective segment's major products, services and distribution methods are as follows: The Climate Solutions Americas, Climate…
- ALLE (Allegion plc)
- FY2025 10-K: …(Subtopic 220-40): Disaggregation of Income Statement Expenses", which requires disaggregated disclosures of certain categories of expenses that are included in expense line items on the face of the consolidated statements of comprehensive income. This guidance will be effective for annual periods beginning after…
- FY2025 10-K: 100% of Gatewise Inc. ("Gatewise"), a provider of smart access control solutions in the U.S. multifamily marketplace based in the United States. Gatewise is reported in the Company's Allegion Americas segment. Waitwhile On July 7, 2025, the Company, through its subsidiaries, acquired 100% of Waitwhile Inc.…
- ROK (Rockwell Automation, Inc.)
- FY2025 10-K: …Artificial Intelligence As we broaden the application of AI across product development, manufacturing, customer operations, and enterprise operations, we face evolving risks related to safety, data governance, regulatory compliance, intellectual property, and ethical use. Integrating AI into our offerings and…
- FY2025 10-K: …does not necessarily represent a market price. Sales between legal entities are at an appropriate transfer price. Segment selling, general and administrative expenses represent costs directly managed by the segments and allocated to the segments. We allocate costs related to shared segment operating activities to the…
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.
- Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
- 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.
Sources
fiscal 2026 third-quarter results, June 25, 2026