DONALDSON COMPANY, INC. (DCI): what the price requires
At today's price, DONALDSON COMPANY, INC. (DCI) is priced for today's economics sustained for ~26.9 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: 2026-07-16 · Source: https://boothcheck.com/report/DCI
Headline
| Field | Value |
|---|---|
| Ticker | DCI |
| Company | DONALDSON COMPANY, INC. |
| Current price | $89.01/sh |
| Composition | Mobile Solutions 62% / Industrial Solutions 30% / Life Sciences 8% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | segment |
| Must persist for | 26.9y |
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 ~5.3 years.
How unusual the bet is: high
| Reference | Value |
|---|---|
| cohort percentile (of 225 peers) | 100 |
| sustained it ~10 years at this level | 14% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; 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 | 2.22x | 5 | expensive |
| Earnings | 2.36x | 5 | expensive |
| Relative | 1.10x | 5 | expensive |
| Growth | 1.34x | 3 | expensive |
Families that justify the price: Relative Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $64.60 | 1.38x | yes | FCF base $0.4B, growth 4% (input: historical growth), terminal g 4.0%, WACC 9.2%, 5yr projection |
| DCF Exit Multiple | Growth | $81.15 | 1.10x | yes | Exit EV/EBITDA: 15.2x / 17.2x / 19.2x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $66.19 | 1.34x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.1x / 18.0x / 20.9x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $40.17 | 2.22x | yes | BV/sh $14.35, ROE (TTM) 25.9%, ke 9.3% |
| Two-Stage Excess Return | Asset | $67.81 | 1.31x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $66.65 | 1.34x | yes | Rev $3.8B, growth 4% (input: historical growth; tapered), Terminal P/S: 2.3x / 2.8x / 3.2x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $125.18 | 0.71x | yes | EPS $3.72, growth 34% (input: historical EPS growth), PEG=0.71 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $37.73 | 2.36x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.52B × (1−24%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $59.75 | 1.49x | yes | BV $14.35 + 5yr PV of (ROE (TTM) 25.9% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $34.66 | 2.57x | yes | √(22.5 × EPS $3.72 × BVPS $14.35) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $62.54 | 1.42x | yes | EBITDA $0.60B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $37.23 | 2.39x | yes | FCF $388.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $35.01 | 2.54x | yes | SBC-adj FCF $0.36B (FCF $0.39B − SBC $0.02B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $120.03 | 0.74x | yes | EPS $3.72 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $12.25 | 7.27x | yes | BV $14.35 × (ROIC 7.9% / WACC 9.2%) |
| P/Sales Sector | Relative | $80.60 | 1.10x | yes | Revenue $3.81B × sector P/S 2.5x |
| PEG Fair Value | Relative | $139.50 | 0.64x | yes | EPS $3.72 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $40.22 | 2.21x | yes | EPS $3.72 / 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 | $446.2m |
| Net debt / NOPAT (after-tax) | 1.15x |
| Net debt / operating income (pre-tax) | 0.87x |
| Interest coverage | 18.9x |
| Share count CAGR (buyback) | -1.3% |
| Burning cash | no |
Bullet Takeaways
- Donaldson is a filtration company that makes most of its durable money on replacement parts, not first-fit equipment: across Mobile Solutions, Industrial Solutions, and Life Sciences it sells the filter once and then sells it again every service interval, which is why a roughly $3.8 billion revenue base produces a 25.9% return on equity.
- The biggest risk is the price, not the business: at about 23 times trailing earnings the stock prices Donaldson's best segment to compound near its self-funding ceiling for the better part of three decades, and history says only about one fast-grower in seven holds that pace even ten years.
- Watch Life Sciences and the Facet integration next: management raised the segment's fiscal 2026 growth outlook to 9% to 11% on food, beverage, and disk-drive demand, and closed the $829 million Facet Filtration acquisition expected to add $25 million to $30 million of sales in the fourth quarter.
Bull Case
Look first at what Donaldson does with the cash, because it tells you how management sees the business. The share count has been falling, down a bit over 1% a year, which is buybacks doing what buybacks are supposed to do, and the company pays a steadily rising dividend on top. It funds both out of operating cash flow while still buying growth, most recently the $829 million Facet Filtration deal and, in fiscal 2025, an equity-method stake in Medica that consumed $71.2 million of cash for the bioprocessing build-out. A company that can pay a dividend, retire stock, and fund tuck-in acquisitions all from the same cash flow is telling you the underlying returns are real. A 25.9% return on equity confirms it.
The reason the returns are durable is the shape of the revenue. Donaldson sells filtration into engines, factories, and life-science processes, and the profitable half of that is the replacement filter, sold over and over to an installed base the company already won. The Industrial Solutions segment spans "Industrial Air Filtration, Industrial Gases, Industrial Hydraulics, Power Generation and Aerospace and Defense products", each with its own service tail, and the company keeps adding technology that deepens the relationship, such as the iCue connected filtration system that "proactively monitors a facility's dust collection equipment to reduce unplanned downtime". Connected hardware turns a parts supplier into a maintenance partner, which is harder to switch away from than a filter on a shelf.
The growth lever now is Life Sciences, and it is working. Management raised the segment's fiscal 2026 outlook to 9% to 11% growth on strength in food and beverage and disk-drive filtration, and the 10-K frames the segment around "changing customer preferences and regulatory standards driving demand for sustainable products" plus bioprocessing consumables, bioreactors, and chromatography devices. Bioprocessing consumables are the same razor-and-blade economics as the legacy filters, only in a higher-growth, higher-margin end market. Layer the Facet acquisition on top, and the bull case is straightforward: a proven compounder is redeploying its cash into the fastest-growing, stickiest corner of filtration while shrinking its own share count. Record adjusted operating margin of 16.6% in the most recent quarter says the mix shift is reaching the bottom line.
Bear Case
The bear case starts with the one advantage Donaldson cannot take for granted: that a filter stays differentiated. The company's own risk language is unusually direct about it, warning that despite investment in research, sales, and service, "we could encounter the commoditization of our key products." That is the whole bear thesis in one clause. Donaldson competes in markets it describes as "very competitive," where it "risk[s] losing business based on a wide range of factors, including pric e, technology, performance, reliability and availability." A replacement filter is a wonderful business right up until a cheaper one that fits the same housing earns the customer's trust. The premium multiple assumes the moat holds; the filing reminds you the moat is something the company has to keep buying.
The arithmetic of the price is the second problem. Strip the premium down and today's level requires Donaldson's Life Sciences engine to grow at its self-funding ceiling for roughly 27 years to justify the price. Against history that is a stretch: only about 14% of comparable fast-growers sustained that kind of pace even ten years, let alone three decades. The valuation methods that lean on demonstrated earnings and assets all land well below the price. Capitalize the current free cash flow with no growth and you get a figure roughly 40% under the price; the conservative earnings-power and asset lenses agree. Only the peer-multiple lens, which credits the sector's willingness to pay up for quality filtration, sits near the price. So the price is not defended by what Donaldson earns today. It is defended by other people paying similar multiples for similar businesses, which is a fragile thing to lean on if the sector de-rates.
The cyclical and input-cost exposure is the third leg. Donaldson buys "steel, filter media, petroleum-based products" and other raw materials, so margins flex with commodity prices, and the Mobile Solutions first-fit business rides on truck, construction, and agriculture build rates that turn with the industrial cycle. The balance sheet is sound, net debt of about $446 million against more than $575 million of trailing operating income and interest covered better than twenty times over, so this is not a solvency story. It is a valuation story. The downside is bounded by a healthy balance sheet and real assets, but the gap between what the price assumes and what the business has demonstrated is wide enough that a single soft year, or a sector multiple compression, takes more out of the stock than the dividend pays back.
Valuation
Begin with what the price is paying for. The premium in Donaldson's price does not sit on the whole company evenly; it concentrates in Life Sciences, the segment growing fastest. Invert the price and it implies that segment's operating growth holds at its self-funding ceiling for about 27 years. That is the bet in one sentence. The near-term growth is real and management just raised the segment's outlook, but the price is underwriting persistence on a scale history rarely delivers, with only about one comparable fast-grower in seven sustaining that pace even a decade. This is the kind of read that is sensitive to a small earnings base, so treat it directionally, but the direction is clear: the price assumes a very long runway.
The methods we use to triangulate spread out in a telling pattern. The peer-multiple lens lands closest to the price, which is the signal that Donaldson is valued the way the market values quality filtration and industrial-technology names, not cheaply and not at an outlier. The asset-value and earnings-power lenses sit well below. Book value plus the profitability above the cost of equity, the zero-growth capitalization of free cash flow, and the normalized earnings-power figure all land roughly 40% to 55% under the price, because none of them credits the future growth the peer multiple is implicitly paying for. Read honestly, that means the price is supported by the comparable-multiple lens and stretched against every backward-looking one. The premium is durability, priced in advance.
Solvency is the floor under all of it, and it is solid. Net debt of about $446 million is less than a single year of operating income, interest coverage runs above twenty times, and the share count is shrinking rather than growing, so capital is being returned, not raised. The company reports it was "in compliance with all such covenants" on its credit facilities at fiscal year-end. None of that justifies the multiple; what it does is bound the downside. The buyer at this price owns a financially sound compounder, but is paying for that compounding to run for an unusually long time, and the cushion against being wrong about the duration comes from the balance sheet, not from the valuation.
Catalysts
Donaldson's most recent print was a quiet beat with a louder mix story underneath. For the quarter ended April 30, 2026, revenue of $995.1 million edged past the roughly $983 million consensus, adjusted EPS of $1.06 landed in line, and adjusted operating margin reached a record 16.6%. The standout was Life Sciences, where sales rose 13% on food, beverage, and disk-drive demand, prompting management to lift the segment's full-year growth outlook to 9% to 11% from a prior 5% to 9%. For a multi-segment industrial, the acceleration in the highest-margin, highest-growth segment is the development that matters most to the longer story.
On capital deployment, the company closed its $829 million acquisition of Facet Filtration, which it expects to contribute $25 million to $30 million of sales in the fiscal fourth quarter. That is a deliberate push deeper into liquid and process filtration, adjacent to the Life Sciences and Industrial franchises Donaldson already runs. Management narrowed full-year fiscal 2026 organic guidance to adjusted EPS of $3.94 to $4.01 on organic sales growth of 3% to 5%; those figures are company-defined adjusted measures and exclude acquisition and restructuring items.
Analyst sentiment is constructive and the range is wide, with published price targets running from about $77 to $123. The spread captures the same tension the valuation shows: the low end treats Donaldson as a steady industrial compounder fairly valued near peer multiples, while the high end credits the Life Sciences and Facet-driven mix shift with a longer, faster growth runway. The next quarterly print, and the first full quarter of Facet inside the numbers, is where that debate gets its next data point.
Peer Cohorts (Per Segment, With Filing Citations)
Mobile Solutions (reported)
- ATMU (Atmus Filtration Technologies Inc.)
- (no filing in the citation store)
- PH (PARKER-HANNIFIN CORPORATION)
- (no filing in the citation store)
- DOV (DOVER Corp)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- PNR (Pentair plc)
- (no filing in the citation store)
Industrial Solutions (reported)
- PH (PARKER-HANNIFIN CORPORATION)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- XYL (Xylem Inc.)
- (no filing in the citation store)
- PNR (Pentair plc)
- (no filing in the citation store)
- DOV (DOVER Corp)
- (no filing in the citation store)
Life Sciences (reported)
- ROK (Rockwell Automation, Inc.)
- (no filing in the citation store)
- PH (PARKER-HANNIFIN CORPORATION)
- (no filing in the citation store)
- FLS (FLOWSERVE CORP)
- (no filing in the citation store)
- XYL (Xylem Inc.)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- EMR (EMERSON ELECTRIC CO.)
- (no filing in the citation store)
- AME (AMETEK, Inc.)
- (no filing in the citation store)
- DOV (DOVER 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
Q3 fiscal 2026 earnings release, June 2026 · Donaldson FY2025 10-K, cash flow · Q3 fiscal 2026 earnings release · Q3 fiscal 2026 earnings call · Donaldson FY2025 10-K, liquidity · analyst estimates, 2026