CSW INDUSTRIALS, INC. (CSW): what the price requires

At today's price, CSW INDUSTRIALS, INC. (CSW) is priced for today's economics sustained for ~6.8 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: 2026-07-19 · Source: https://boothcheck.com/report/CSW

Headline

FieldValue
TickerCSW
CompanyCSW INDUSTRIALS, INC.
Current price$281.44/sh
CompositionContractor Solutions 74% / Specialized Reliability Solutions 15% / Engineered Building Solutions 11%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed7.3%
Operating margin today16.4%
Margin compression implied-9.1pp
Must persist for6.8y
Multiple paid35x 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 9.1% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.

How unusual the bet is: high

ReferenceValue
vs own history+0.37σ
cohort percentile (of 74 peers)87
sustained it ~6.8 years at this level24%
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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.

FamilyMedian price/FVModelsReads
Asset3.59x4expensive
Earnings9.00x3expensive
Relative2.88x3expensive
Growth0.85x3justifies

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.

Per-Model Detail (n=13)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$330.980.85xyesFCF base $0.2B, growth 23% (input: historical growth), terminal g 4.0%, WACC 8.3%, 7yr projection
DCF Exit MultipleGrowth$336.470.84xyesExit EV/EBITDA: 30.4x / 32.4x / 34.4x (bear / base = today's held flat / bull), 7yr
Relative ValuationRelative$142.321.98xyesP/E 22.34x (blended: static sector reference 14x + trailing (TTM) 42x), scenarios: 18.0x / 22.3x / 26.7x (bear / base = reference held flat / bull), EV/EBITDA 15.33x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$72.793.87xyesBV/sh $63.12, ROE (TTM) 10.7%, ke 9.3%
Two-Stage Excess ReturnAsset$77.973.61xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$312.640.90xyesRev $1.1B, growth 23% (input: historical growth; tapered), Terminal P/S: 3.5x / 4.3x / 5.2x (bear / base = today's held flat / bull, cap 12x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$23.2212.12xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.15B × (1−27%) / WACC 8.3% → EPV (no growth)
Residual IncomeAsset$78.953.56xyesBV $63.12 + 5yr PV of (ROE (TTM) 10.7% − Kₑ 9.3%) × BV; BV grows 6.9%/yr
Graham NumberAsset$97.552.89xyes√(22.5 × EPS $6.70 × BVPS $63.12) — Graham's conservative floor
EV/EBITDA RelativeRelative$28.179.99xyesEBITDA $0.17B × sector EV/EBITDA 8.0x
FCF YieldEarnings$31.279.00xyesFCF $132.4M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$5.6250.08xyesEPS $6.70 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$11.1625.22xyesBV $63.12 × (ROIC 1.5% / WACC 8.3%) (excluded from median)
P/Sales SectorRelative$97.582.88xyesRevenue $1.08B × sector P/S 1.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$72.433.89xyesEPS $6.70 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$837.7m
Net debt / NOPAT (after-tax)7.25x
Net debt / operating income (pre-tax)5.28x
Share count CAGR (dilution)1.2%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

At $280 the price pays about 35x company-wide operating income, which requires growth held near its self-funding ceiling for roughly seven years. History says only about 23% of comparable fast-growers sustained that pace that long, so the priced-in assumption reads as elevated.

The X-ray is lopsided: only the growth-DCF family reaches the price, while asset, earnings-power, and peer-multiple methods all land far below it.

Capital allocation is the engine. The $650 million MARS Parts deal and two smaller tuck-ins expanded the HVACR portfolio in late 2025, but Q3 FY2026 showed the strain: record revenue up 20% to $233 million, yet EPS of $1.42 missed by a wide margin as Contractor Solutions saw organic declines.

Bull Case

Start with how CSW deploys cash, because the whole thesis runs through capital allocation. This is a serial acquirer of niche industrial products for the professional trades, and it has been buying steadily, with deals in fiscal 2023, 2024, and 2025 layered onto a base of installation and service products designed for the pro trade (FY2025 10-K, accession 0001624794-25-000056). In late 2025 it pressed the accelerator: the $650 million MARS Parts acquisition closed on November 4, adding motors, capacitors, and HVACR electrical components used by the trade for repairs and replacements, followed by Hydrotex and ProAction Fluids for over $26.5 million. The strategy is to roll up high-margin consumable parts that sit in a contractor's truck, where pricing power is real and the buyer is choosing reliability over price.

The model that reaches the price tells you what the market is paying for. Only the growth-DCF family lands at or above $280, with the DCF perpetual-growth read near $331 and the discounted future market-cap read near $311, both built on roughly 23% historical revenue growth. The business runs a 15.6% operating margin and a portfolio of brands, Vent, Intermatic, Little Giant, Nu-Calgon, NSI Industries and others, that compete on a culture of product enhancement and customer-centric solutions rather than on price (FY2025 10-K, accession 0001624794-25-000056). For a compounder, the static valuation frames understate the value because they cannot price durable reinvestment at high returns; the growth methods can, and they support the quote.

Capital return rounds out the picture. CSW returned $106.2 million year to date through buybacks and dividends and declared a $0.27 quarterly dividend, while keeping net debt to EBITDA at 2.3x, inside its stated 1x to 3x target range even after the MARS deal. The full fiscal-year 2026 print was strong on the headline, with revenue up about 23% to $1.08 billion. The bull case is that CSW keeps finding accretive deals in fragmented HVACR and industrial niches, integrates them at high incremental margins, and grows into a multiple that today looks demanding. If the compounding engine keeps running, the growth methods near $310 to $335 are the relevant anchors and the price is a fair entry for a quality serial acquirer.

Bear Case

The uncomfortable read is the gap between peak reported numbers and sustainable earnings, and the cycle is already showing through. Q3 FY2026 was billed as record revenue, up 20% to $233 million, but that growth was bought: it came from acquisitions while Contractor Solutions, the 74% core, posted organic declines on HVACR market weakness. Strip the deals and the underlying business shrank. The earnings line told the truth more bluntly, with EPS of $1.42 against roughly $1.93 expected, a miss of about 26%, and full-year earnings of $112 million actually down about 18% from the prior year even as revenue rose. Acquired revenue at a lower marginal profit, plus integration and financing costs, is masking organic softness in the demand cycle.

The valuation makes that softness expensive. At about 35x operating income the price embeds growth held near the self-funding ceiling for nearly seven years, and only about 23% of comparable fast-growers sustained that pace that long. The static methods are emphatic: the Earnings Power Value method lands near $23, the FCF-yield method near $31, and the relative read near $142, all far below the $280 price (June 27, 2026), because they capitalize normalized earnings rather than a deal-fueled top line. The implied operating margin the price requires is about 6.7%, well under the 15.6% the business runs today, which is the model's way of saying the price needs a long, high tail of reinvested growth to make sense.

The acquisition machine also carries balance-sheet and integration risk. The MARS deal was funded largely with term debt and revolver borrowings, and net debt sits near $838 million on the engine's read, close to 5x trailing operating income before the full earnings contribution of the new units flows through. Serial acquirers compound beautifully until a deal disappoints or the cycle turns and leverage meets a downturn at the same time. With HVACR demand already soft, organic growth negative in the core, and EPS missing, the risk is paying a durable-compounder multiple for a business that is currently growing by purchase rather than by performance. If the demand cycle does not recover, the conservative methods, not the growth-DCF, are the honest read.

Valuation

Begin with the inversion, because it frames everything. At $280 the market pays about 35x company-wide operating income, which solves to growth held at the roughly 25% self-funding ceiling for about seven years, computed at a 9.1% cost of capital. That is an elevated assumption: it is within what CSW has recently delivered on a rate basis, but the stretch is duration, and only about 23% of comparable fast-growers sustained that pace for nearly seven years. Each one-point change in the cost of capital moves the implied horizon by about 1.9 years, so the read is duration-sensitive rather than rate-fragile.

The model families are unusually lopsided. Only the growth-DCF family reaches the price, with the DCF perpetual-growth and exit-multiple reads near $331 to $335 and the discounted future market-cap read near $311. Every other family lands well below: relative valuation near $142, the asset methods near $73 to $98, and the earnings-power methods near $23 to $31. That pattern is the signature of a quality compounder priced for durability the static frames structurally cannot capture.

The synthesis is that you are paying for durable, reinvested compounding and nothing else supports it. If CSW keeps acquiring and integrating at high incremental returns, the growth methods near $310 to $335 justify the price. If the HVACR cycle stays soft and organic growth stays negative, the static methods near $142 and below, and the $168 base, are the relevant anchors.

Catalysts

The defining recent event was fiscal Q3 2026 results, released January 29, 2026: record revenue up 20% to $233 million and record adjusted EBITDA of $44.8 million, up 7%, but EPS of $1.42 that missed estimates near $1.93 by about 26%. The important detail beneath the record headline was that the growth came from acquisitions while Contractor Solutions posted organic declines on HVACR market weakness. The single thing to watch is whether organic growth in the core segment turns positive again, because that, not deal accounting, is what justifies the multiple.

M&A is the other live catalyst. CSW closed the $650 million MARS Parts acquisition on November 4, 2025, funded largely with term debt and revolver borrowings, and added Hydrotex and ProAction Fluids for over $26.5 million on November 21. The integration of MARS into the HVACR portfolio is the near-term value driver, and net debt to EBITDA at 2.3x leaves some room for further deals inside the stated 1x to 3x range. Capital return continued with $106.2 million in year-to-date buybacks and dividends and a $0.27 quarterly dividend. On sentiment, the analyst view is mixed, ranging from Hold to Buy, with price targets spanning roughly $269 to $340 and clustering near $290 to $325. The next earnings report and any sign of HVACR demand stabilizing are the events most likely to move the thesis.

Sources: CSW Q3 FY2026 results (StockTitan), CSW Q3 FY26 slides (Investing.com), CSW forecast (StockAnalysis), CSW analyst ratings (ChartMill).

Peer Cohorts (Per Segment, With Filing Citations)

Contractor Solutions (reported)

Specialized Reliability Solutions (reported)

Engineered Building Solutions (reported)

Methodology Note

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.

View the full interactive CSW report on boothcheck