CARPENTER TECHNOLOGY CORPORATION (CRS): what the price requires
At today's price, CARPENTER TECHNOLOGY CORPORATION (CRS) is priced for today's economics sustained for ~17.8 years. 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: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/CRS
Headline
| Field | Value |
|---|---|
| Ticker | CRS |
| Company | CARPENTER TECHNOLOGY CORPORATION |
| Current price | $568.70/sh |
| Composition | Aerospace and Defense 61% / Medical 12% / Energy 7% / Transportation 4% / Industrial and Consumer 13% / Distribution 3% |
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 | 27.2% |
| Operating margin today | 21.1% |
| Margin expansion implied | +6.1pp |
| Must persist for | 17.8y |
| Multiple paid | 45x operating income |
The operating-margin requirement is derived from the framework's value band at year 10, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 13.1% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.7 years.
Reconcile: at the x-ray's 9.3% required return this reads ~9.1 years; the models below use their own rates.
How unusual the bet is: high
| Reference | Value |
|---|---|
| vs own history | +0.02σ |
| cohort percentile (of 76 peers) | 91 |
| sustained it ~10 years at this level | 15% |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.
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 | 4.66x | 4 | expensive |
| Earnings | 7.15x | 5 | expensive |
| Relative | 2.16x | 5 | expensive |
| Growth | 2.17x | 3 | expensive |
Families that call it expensive: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $147.92 | 3.84x | yes | FCF base $0.4B, growth 4% (input: historical growth), terminal g 4.0%, WACC 9.1%, 5yr projection |
| DCF Exit Multiple | Growth | $447.96 | 1.27x | yes | Exit EV/EBITDA: 31.7x / 36.7x / 41.7x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $263.83 | 2.16x | yes | P/E 27.71x (blended: static sector reference 14x + trailing (TTM) 60x), scenarios: 20.8x / 27.7x / 33.3x (bear / base = reference held flat / bull), EV/EBITDA 16.6x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $102.97 | 5.52x | yes | BV/sh $41.11, ROE (TTM) 23.2%, ke 9.3% |
| Two-Stage Excess Return | Asset | $162.68 | 3.50x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $261.99 | 2.17x | yes | Rev $3.0B, growth 4% (input: historical growth; tapered), Terminal P/S: 4.5x / 6.0x / 7.2x (bear / base = today's held flat / bull, cap 6x) |
| Peter Lynch Fair Value | Relative | $328.25 | 1.73x | yes | EPS $9.50, growth 35% (input: historical EPS growth), PEG=1.73 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $39.56 | 14.38x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.28B × (1−21%) / WACC 9.1% → EPV (no growth) |
| Residual Income | Asset | $149.91 | 3.79x | yes | BV $41.11 + 5yr PV of (ROE (TTM) 23.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $93.74 | 6.07x | yes | √(22.5 × EPS $9.50 × BVPS $41.11) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $117.78 | 4.83x | yes | EBITDA $0.79B × sector EV/EBITDA 8.0x |
| FCF Yield | Earnings | $79.52 | 7.15x | yes | FCF $407.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $74.10 | 7.67x | yes | SBC-adj FCF $0.38B (FCF $0.41B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $306.53 | 1.86x | yes | EPS $9.50 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $27.06 | 21.02x | yes | BV $41.11 × (ROIC 6.0% / WACC 9.1%) (excluded from median) |
| P/Sales Sector | Relative | $90.32 | 6.30x | yes | Revenue $3.03B × sector P/S 1.5x |
| PEG Fair Value | Relative | $356.25 | 1.60x | yes | EPS $9.50 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $102.70 | 5.54x | yes | EPS $9.50 / 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 | $395.6m |
| Net debt / NOPAT (after-tax) | 0.79x |
| Net debt / operating income (pre-tax) | 0.63x |
| Interest coverage | 14.9x |
| Share count CAGR (dilution) | 0.9% |
| Burning cash | no |
Bullet Takeaways
- Carpenter makes the specialty alloys that go into jet engines and airframes, a business where it claims "over 135 years of metallurgical and manufacturing expertise," and aerospace and defense is its largest end market at roughly 61% of sales.
- The defining tension is price versus value: the company is posting record margins, with its Specialty Alloys segment hitting a 35.6% adjusted operating margin, yet the stock is priced so richly that no standard valuation method reaches it.
- What to watch is whether the aerospace supercycle holds: management raised fiscal 2026 operating income guidance to $700 to $705 million, citing the highest aerospace structural bookings in years, and the bet is on that demand persisting.
Bull Case
Carpenter is a cyclical business living through its best part of the cycle, and the right way to read the numbers is to understand both halves of that sentence. The company supplies specialty alloys for the most demanding applications in aerospace, defense, and medical, where the metal has to perform under extreme stress and the qualification process to become an approved supplier takes years. That creates real pricing power, and right now the company is using it: Carpenter posted record quarterly operating income in its fiscal third quarter, with its Specialty Alloys segment reaching a 35.6% adjusted operating margin and pricing the company describes as consistently increasing.
The demand backdrop is unusually strong and unusually durable for a cyclical. Aerospace and defense sales rose 17% year over year with the highest aerospace structural bookings in years, and the structural story underneath is a shortage of the base aerospace alloys that Boeing, Airbus and defense contractors need, a shortage analysts see persisting into the next decade as aircraft build rates climb. Carpenter's filings show the same momentum, with sales driven by a 27% increase in the aerospace and defense end-use market. When the constraint on an industry is your product and you have a 135-year head start in making it, you set price rather than take it.
The financials confirm a high-quality compounder, not a leveraged cyclical bet. Carpenter generates around $407 million of free cash flow, earns a return on equity in the low twenties, and carries modest debt with interest covered more than fifteen times. Management raised fiscal 2026 operating income guidance to $700 to $705 million, at least a third above the prior year, and adjusted free cash flow guidance to roughly $350 million. The bull case is a moat-protected supplier at the center of a multi-year aerospace ramp, with record margins, strong cash generation, and a balance sheet that lets it invest into the demand. The premium multiple is the price of owning the company that the aerospace build-out cannot do without.
Bear Case
The variable with the most leverage on Carpenter is the one it does not control: the aerospace build cycle, and the price assumes that cycle runs hot for an extraordinarily long time. Read backward, today's level pays about 47 times company-wide operating income, which implies operating profit holding near its self-funding ceiling for something like 17 years. Only about 15% of comparable fast-growers sustained that kind of pace for even a decade. Carpenter's own filings concede the underlying fragility, noting its end markets "can be cyclical in nature and sensitive to general economic conditions, competitive influences and fluctuations in inventory levels throughout the supply chain." A 17-year smooth run from a business that admits it is cyclical is the bet the price is making.
The peak-versus-sustainable problem is the heart of it. Carpenter is earning record margins precisely because aerospace demand outruns alloy supply right now. That is the definition of a favorable point in the cycle, not a permanent state. Aircraft build rates depend on Boeing and Airbus executing their ramps, on airline order books holding, and on the broader economy supporting air travel, and any of those can soften. When the supply shortage eases, whether through Carpenter's own capacity additions, competitors expanding, or demand cooling, the elevated pricing that drives the 35.6% segment margin compresses. The price is paying today's peak margin forward as if it were the baseline.
The valuation makes the asymmetry stark. Every family of method sits below the price: the asset-value methods, the earnings-power methods, the peer-multiple comparison against other specialty-materials makers, and even the forward-growth methods. State the requirement plainly: to justify the price, operating profit has to compound near its maximum self-funded rate for the better part of two decades, and if growth fades toward the mid-single-digit pace the business has historically delivered, the multiple compresses toward where the peer and earnings-power methods land, which is a long way below today's price. The balance sheet is not the risk, net debt is low and coverage is ample, so this is not a solvency story. It is a quality cyclical priced for a permanent peak, where the danger is not that the company stumbles but that the cycle simply normalizes.
Valuation
The price embeds an aggressive bet, and the cleanest statement of it is the multiple on operating profit. At today's level the implied requirement is that operating profit holds near its self-funding ceiling for roughly 17 years, a duration only about 15% of comparable fast-growers achieved. Keep those figures approximate; they are a single solve. The point is that this is priced as a structural compounder running at peak for the better part of two decades, not as a cyclical enjoying a strong stretch, and the gap between those two readings is the whole question.
The methods we use to triangulate are unusually one-sided: none of them reaches the price. The asset-value methods, anchored on book value plus a strong return on equity, land well below it. The earnings-power methods, capitalizing current cash generation, land lowest, because they credit none of the cycle. The peer-multiple comparison against other specialty-materials makers lands below the price too. Even the forward-growth methods, which should be the most generous, do not reach today's level. When no family reaches the price, the spread is not a value or durability read in the usual sense; it is a bet beyond what any standard frame supports, defensible only if the aerospace shortage and the pricing it enables persist far longer than a normal cycle.
Solvency is the one place the numbers are unambiguously comfortable, and it is the reason this is a quality name rather than a fragile one. Net debt is modest at under $400 million, interest is covered more than fifteen times, and the company generates around $407 million of free cash flow with a share count barely changed. That balance sheet lets Carpenter invest into the demand without strain and removes financial-distress risk from the picture entirely. What it does not do is justify the multiple. The cash and the moat are the floor under the company; the 47-times figure is the bet on top, and the two should be weighed separately. The reader is underwriting not whether Carpenter is excellent, it is, but whether the current peak in its end markets is in fact a plateau.
Catalysts
The defining catalyst is the aerospace build cycle. Aerospace and defense sales rose 17% year over year in the fiscal third quarter, with the highest aerospace structural bookings in years and pricing the company describes as consistently increasing. The structural support is a shortage of base aerospace alloys that analysts expect to persist as Boeing and Airbus lift production rates, so the pace of those build-rate increases, and any sign of order softening, is the single biggest swing factor for the thesis.
The near-term catalyst is the guidance trajectory. Management raised fiscal 2026 operating income guidance to $700 to $705 million, at least a third above the prior year, with adjusted free cash flow of about $350 million, after posting record quarterly operating income and a record 35.6% Specialty Alloys segment margin. Each quarter that confirms margins holding at these levels supports the premium; any sign of pricing or volume rolling over would test it directly, given how much the multiple assumes.
The valuation backdrop frames the risk-reward. The stock has roughly doubled over the past year, and even an overwhelmingly bullish analyst group carries an average price target below the current price, with a range running from roughly $340 to $500. That gap between price and targets is itself a signal that the rally has outrun where the sell side last anchored. The next earnings print is the test of whether the record margins and raised guidance can keep climbing or are approaching the top of the cycle the price has extrapolated far into the future.
Peer Cohorts (Per Segment, With Filing Citations)
Specialty Alloys Operations (reported)
- ATI (ATI INC)
- (no filing in the citation store)
- HWM (HOWMET AEROSPACE INC.)
- (no filing in the citation store)
- KALU (KAISER ALUMINUM CORP)
- (no filing in the citation store)
- CSTM (CONSTELLIUM SE)
- (no filing in the citation store)
- TS (Tenaris SA)
- (no filing in the citation store)
Performance Engineered Products (reported)
- ATI (ATI INC)
- (no filing in the citation store)
- HWM (HOWMET AEROSPACE INC.)
- (no filing in the citation store)
- KALU (KAISER ALUMINUM CORP)
- (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.
Sources
CRS FY2025 10-K, accession 0000017843-25-000021 · Carpenter Q3 FY2026 results · aerospace demand coverage, 2026 · CRS solvency, latest filings · analyst notes, 2026