FRANKLIN ELECTRIC CO., INC. (FELE): what the price requires

At today's price, FRANKLIN ELECTRIC CO., INC. (FELE) is priced for +15.9% 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: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/FELE

Headline

FieldValue
TickerFELE
CompanyFRANKLIN ELECTRIC CO., INC.
Current price$103.40/sh
CompositionWater Systems 59% / Distribution 33% / Energy Systems 14% / Intersegment Eliminations/Other -6%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed6.9%
Operating margin today12.5%
Margin compression implied-5.6pp
Implied growth15.9%
Multiple paid18x 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 9.7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.6pp.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.17σ
cohort percentile (of 225 peers)33
sustained it ~5 years at this level49%
implied end-window share0%

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.

FamilyMedian price/FVModelsReads
Asset2.59x5expensive
Earnings2.73x4expensive
Relative1.16x3expensive
Growth1.15x3expensive

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 9.0%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$89.631.15xyesFCF base $0.2B, growth 8% (input: historical growth), terminal g 4.0%, WACC 9.0%, 6yr projection
DCF Exit MultipleGrowth$108.790.95xyesExit EV/EBITDA: 11.9x / 13.9x / 15.9x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$84.121.23xyesP/E 21.82x (blended: static sector reference 18x + trailing (TTM) 31x), scenarios: 18.1x / 21.8x / 25.5x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$36.392.84xyesBV/sh $29.97, ROE (TTM) 11.2%, ke 9.3%
Two-Stage Excess ReturnAsset$39.942.59xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$88.721.17xyesRev $2.2B, growth 8% (input: historical growth; tapered), Terminal P/S: 1.8x / 2.1x / 2.5x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$46.782.21xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.25B × (1−24%) / WACC 9.0% → EPV (no growth)
Residual IncomeAsset$40.632.54xyesBV $29.97 + 5yr PV of (ROE (TTM) 11.2% − Kₑ 9.3%) × BV; BV grows 7.3%/yr
Graham NumberAsset$47.322.19xyes√(22.5 × EPS $3.32 × BVPS $29.97) — Graham's conservative floor
EV/EBITDA RelativeRelative$89.031.16xyesEBITDA $0.34B × sector EV/EBITDA 12.0x
FCF YieldEarnings$39.302.63xyesFCF $169.5M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$36.432.84xyesSBC-adj FCF $0.16B (FCF $0.17B − SBC $0.01B) capitalized at Kₑ
Ben Graham FormulaEarnings$2.7837.19xyesEPS $3.32 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$8.5912.04xyesBV $29.97 × (ROIC 2.6% / WACC 9.0%)
P/Sales SectorRelative$121.720.85xyesRevenue $2.18B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$35.892.88xyesEPS $3.32 / 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$54.0m
Net debt / NOPAT (after-tax)0.27x
Net debt / operating income (pre-tax)0.20x
Interest coverage25.5x
Share count CAGR (buyback)-1.3%
Burning cashno

Bullet Takeaways

At $104, the price pays roughly 18x company-wide operating income, which works out to about 17% annual operating-profit growth held for five years. That is near the pace Franklin Electric has recently shown, so the demand is mostly about duration, not a heroic acceleration.

The valuation methods split cleanly by what they reward. Peer multiples and the growth-DCF land near today's price; asset-based and earnings-power methods sit far below it, because book value and a no-growth earnings stream do not capture a serial acquirer's compounding.

Q1 2026 backed the setup: sales up 10% to $500.4 million, Water Systems up 11%, adjusted EPS up 24% to $0.83. Management held full-year guidance of $2.17 to $2.24 billion in sales rather than raising it, citing macro and geopolitical uncertainty.

Bull Case

What the asset-based and earnings-power models miss here is the entire mechanism of how this business compounds. Run a zero-growth earnings-power calculation and Franklin Electric looks worth about $47; capitalize book value at the cost of capital and you get something near $40. Both numbers describe a company frozen in place. The actual company is a serial buyer of small water and energy businesses that it folds onto a global platform. The 10-K is explicit that this is the plan, describing acquisitions that "provide complementary Water and Energy Systems products" as a continuing strategy to expand market share (accession 0000038725-26-000009). A model that holds the business flat cannot price a business whose entire design is to not stay flat.

The operating quality is real, not a story. Q1 2026 delivered 10% sales growth to $500.4 million with Water Systems, the largest leg at 59% of the company, up 11%. Energy Systems, the smallest segment, threw off $99.1 million of operating income in 2025, an increase of $5.5 million year over year (accession 0000038725-26-000009), which is heavy profit from a piece the asset models barely register. Interest coverage runs near 24x and net debt is only about a quarter of trailing operating income, so the balance sheet carries the acquisition program comfortably. This is a company that earns its growth rather than borrowing the appearance of it.

The peer set tells the same story from the outside. Franklin Electric competes against Lennox, Toro, Timken, Valmont, and Gorman-Rupp, a cohort of industrial compounders that the market generally pays up for, and the relative-valuation method lands at $84 while the EV/EBITDA comp lands near $89. The growth-DCF lands at $90, and the exit-multiple DCF actually clears today's price at about $109. When the methods that account for forward economics cluster near or above the price, and only the static methods say expensive, the disagreement is information about which lens fits the business, not a verdict that the stock is broken.

Bear Case

Start with which models are saying which thing, because the disagreement is the whole bear case. Of the four valuation families, two land near the price and two land far below it. The growth-DCF and the peer multiples reach the low $80s to low $90s; the asset and earnings-power methods cluster between $36 and $47. The conservative methods are not confused. They are pricing the cash the business produces today without assuming the acquisition machine keeps working, and on that basis the stock trades at well over double its support. The bull needs the optimistic lens to be the honest one, and the optimistic lens is the one that has to be re-earned every year.

The priced-in math is forgiving on rate but demanding on persistence. About 17% operating growth a year is within what Franklin Electric has recently delivered, so this is not a case of the market pricing a number the company has never hit. The strain is in the holding period. Historically only about 47% of comparable fast-growers sustained that pace for five full years, so the price is a coin-flip on duration dressed up as a base case. Each percentage point of growth that fails to show up moves the warranted value by a meaningful amount, and the static models are already telling you where the floor sits if the compounding stalls.

The macro exposure is concrete and management is signaling caution about it. The 10-K names raw material costs, supply constraints, price increases, and integration of acquisitions among the principal risks to earnings (accession 0000038725-26-000009), and the same filing flags currency and commodity sensitivity in a business that sells globally. Tellingly, after a 24% adjusted-EPS quarter, management did not raise full-year guidance, holding the $2.17 to $2.24 billion sales range and citing macroeconomic and geopolitical uncertainty. When a company beats and declines to extrapolate the beat, the prudent read is that the back half is less certain than the print, and the price is leaning on the print.

Valuation

Inverting the price is the cleanest way to see the bet. At $104 the market pays about 18x company-wide operating income, which solves to roughly 17% annual operating-profit growth sustained over a five-year stage, computed at a 9.9% cost of capital with 4% terminal growth. Each additional point of cost of capital would lift that required growth by about 6.6 points, so the assumption is sensitive to rates but not fragile at current levels. Against the company's own record the 17% pace is unremarkable; the demanding part is that it must hold for the full window.

The model X-ray shows why reasonable people land in different places. The growth family carries a median ratio near 1.16x, with the perpetual-growth DCF at $90, the future-market-cap method at $89, and the exit-multiple DCF above the price at $109. The relative family sits near 1.17x, anchored by a blended P/E around 22x and a sector EV/EBITDA comp at $89. The asset and earnings families are the outliers: simple and two-stage excess return at $36 to $40, earnings-power value at $47, and FCF-yield capitalization in the high $30s, all of which describe a business with no future.

The band that results runs from about $75 at the low end to $90 at the base and $135 at the high end, with reliability tagged as ok. Today's price sits above the base and below the high, which is consistent with the overall read: within range, justified if the acquisition-driven compounding persists, expensive if you hold the business still. The Q1 print and the maintained full-year guidance of $4.40 to $4.60 in adjusted EPS are the live evidence either side will point to.

Catalysts

Q1 2026, reported April 28, was the most recent hard data point: net sales of $500.4 million, up 10% and ahead of the roughly $479 million consensus, with GAAP EPS of $0.77 and adjusted EPS of $0.83, up 24%. Water Systems rose 11% to $318.0 million, Distribution rose 6% to $150.9 million, and Energy Systems rose 7% to $71.8 million. The clearest near-term swing factor is whether the next quarter lets management lift the full-year guidance it deliberately held at $2.17 to $2.24 billion in sales and $4.40 to $4.60 in adjusted EPS.

Capital deployment is the other live thread. In 2026 Franklin Electric closed the acquisition of Piertek and related water-technology entities for a combined $50 million in May, and added Wood Bros to its Water Treatment business in an all-cash deal that broadens its distribution reach. Each tuck-in feeds the compounding the bull case depends on, so integration progress and the cadence of further deals are worth tracking.

Sentiment is muted. The visible analyst consensus is Hold, with a 12-month price target clustered around $112 to $116 and a range from $100 to $120, and DA Davidson among those nudging its target higher. With the stock near $104 (June 27, 2026), the published targets imply modest upside and frame the name as fairly valued rather than mispriced, which fits the within-range read from the inversion.

Sources: stocktitan.net (Q1 2026 release), fool.com (Q1 2026 transcript), marketbeat.com (FELE forecast), gurufocus.com (DA Davidson target).

Peer Cohorts (Per Segment, With Filing Citations)

Water Systems (reported)

Distribution (reported)

Energy Systems (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 FELE report on boothcheck