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

In the published model solve dated 2026-Q2, anchored at $100.56, FRANKLIN ELECTRIC CO., INC. (FELE) is priced for +12.9% 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 2026-07-26.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/FELE

Headline

What The Price Assumes (Inversion)

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

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 9.5% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

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.

Families that justify the price: 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=12)

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.

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

Bullet Takeaways

• Profit here is far more concentrated than revenue: submersible fuelling systems account for roughly a seventh of sales, yet Energy Systems operating income in 2025 was $99.1 million out of $268.9 million consolidated, so the smallest reported business throws off close to a third of the segment profit.
• The demand risk is residential construction, and the company files it as a risk heading in its own words: Reduced housing starts adversely affect demand for the Company's products, thereby reducing revenues.
• The next scheduled read is the second-quarter report on July 28, 2026, and the line to watch is whether the distribution arm keeps improving after a year in which its operating income rose by 15.5 million dollars.

Bull Case

A submersible well pump sits underground, out of sight, doing one job until the day it stops. When that day comes the homeowner is not shopping around; they are phoning whoever the local driller uses. The same logic governs a fuel dispenser under the forecourt of a filling station. Businesses like this are not valued on how many new houses get built, though that helps at the margin. They are valued on the size of the installed base and the rate at which it wears out, because replacement demand is the part of the order book that shows up whether or not anybody is feeling optimistic.

Franklin Electric sells into three of those installed bases at once. Water Systems is the largest at 59% of revenue, the distribution arm accounts for 33%, and Energy Systems, which designs, manufactures and sells pumps, electronic controls and related parts and equipment primarily for use in submersible fueling system applications, takes the remaining share. That last one is where the economics get interesting. Energy Systems operating income in 2025 was $99.1 million, an increase of $5.5 million as compared to the prior year. Compare it with the largest business, where Water Systems operating income in 2025 was $207.2 million, an increase of $9.3 million as compared to the prior year, and the shape becomes clear: the fuelling business earns roughly half of what the water business does on about a quarter of the sales.

The distribution arm is the piece that changed most. Distribution operating income in 2025 was $39.8 million, an increase of $15.5 million on the prior year, which is the sort of step that only comes from mix and pricing rather than volume, since the segment's sales did not move nearly that far. Consolidated operating income rose to $268.9 million from $243.6 million on the same comparison. Two thirds of that improvement came from a business the market has historically treated as the low-margin appendage.

Growth in the core has been unglamorous and real. Water Systems sales in the U.S. and Canada rose 3% in 2025, with sales of large dewatering equipment increased 7 percent, and the company adds that consolidated sales growth carried an incremental sales impact from recent acquisitions of approximately 4 percent alongside price realisation. Neither number is spectacular. Together they describe a business that compounds by taking small pieces of adjacent markets rather than by winning a single large bet.

The balance sheet gives management room to keep doing that. On the funded-debt basis the company carries about 54.0 million dollars of net debt against a business whose operating profit covers its interest bill roughly 25 times over, and the share count has been drifting lower for four years. In April the board lifted the quarterly dividend 5.7% to $0.28 a share. That combination, a modest leverage position and a rising payout, is what a company looks like when it believes its cash flows are dull in the best sense of the word.

Bear Case

Watch where the cash goes, because it explains a good deal of what looks like organic momentum. The company is explicit that buying things is the plan: One of the Company's continuing strategies is to increase revenues and expand market share through acquisitions that will provide complementary Water and Energy Systems products, add to the Company's global reach, or both. In 2025 that strategy contributed an incremental sales impact from recent acquisitions of approximately 4 percent, and in May 2026 it closed on Wood Bros., a Nebraska distributor. Purchased revenue is still revenue. It is just revenue that has to clear a return hurdle before it counts as value creation, and a serial acquirer's returns are the hardest thing in its accounts to see from outside.

The return on the equity already invested gives a rough read on how that has gone. Trailing return on equity runs near 11.2% against a required return in the region of 9.3%. That spread is positive, which is the bull's point, and it is thin, which is the bear's. A roll-up earning two points above its cost of equity is compounding at a pace that a single misjudged deal or a goodwill write-down can erase, and the segment most fed by acquisitions is the one that until last year earned the least per dollar of sales.

Set that against what the price is asking for. Today's price embeds operating-profit growth of roughly 16.5% a year over the next five years. In 2025 the company grew consolidated operating income from $243.6 million to $268.9 million, a little over 10%, and about four points of the sales growth underneath it was bought rather than built. So the requirement is not merely to repeat last year. It is to run faster than last year, organically, for half a decade. Of companies that have grown at that pace, only about 48% sustained it that long.

The operating environment is not helping the arithmetic. Housing is the named demand risk, and the company reports that one segment's operating margin fell on higher tariff cost and an unfavorable geographic sales mix shift. Tariffs on imported components land directly on a manufacturer that ships motors and pumps across borders, and price realisation only offsets them until customers stop accepting price.

Finally the frames that credit nothing forward. The price sits roughly 164% above the asset-value methods, which measure the business by its book and the return earned on that book, and about 179% above the earnings-power methods, which capitalise what it earns today with no growth credited at all. The bear case is not that the balance sheet is fragile, because it plainly is not. It is that a business earning around 12.5% operating margins is being priced as though the next five years will look materially better than the last one did, and the evidence for that is a distribution segment that improved once.

Valuation

Start with what the price asks the company to do. Run the arithmetic backwards from $105.49 a share and roughly 4.7 billion dollars of market value, and the embedded assumption is operating-profit growth of about 16.5% a year for the next five years, from a business currently converting sales into operating profit at around 12.5%. That is not a heroic rate in isolation. Plenty of industrials have grown that fast for a year or two. The demanding part is the tenure: only about 48% of the companies that reached that pace held it for five years.

No family of method reaches today's price, but they miss by very different distances, and the pattern is the useful part. The forward-growth methods and the peer-multiple methods both land within about a fifth of the price, at premiums of roughly 17% and 18%. The price runs about 164% above the asset-value methods and about 179% above the earnings-power methods. That is the signature of a quality premium rather than a value opportunity: the market is paying for the business to keep doing what it does, and the frames that refuse to credit the future are the ones that say the price is expensive.

What has to be true, then, is that the growth eventually stops being purchased. The reported segment detail shows where it would have to come from. Energy Systems operating income in 2025 was $99.1 million on the smallest revenue base of the three, so incremental fuelling-system demand carries more profit per dollar than anything else the company sells, and any prolonged pause in filling-station upgrade cycles removes the most valuable growth available. Water Systems, at $207.2 million, is the ballast rather than the accelerator. Distribution improved sharply in one year and has to prove it can hold the gain.

The peer cohort supports the framing rather than the price. MWA, which sells into overlapping municipal water infrastructure, reported that its Water Management Solutions Net sales for 2025 were $604.8 million as compared with $559.2 million in the prior year, an increase of $45.6 million or 8.2%, per its own annual filing. That is roughly the growth rate the water side of this industry has been delivering, and it is comfortably short of the pace embedded in this share price. The gap has to be closed by mix, by the fuelling business, or by acquisition.

Solvency neither adds to that case nor subtracts from it, which is the appropriate outcome for a company of this shape. Net debt on the funded-debt basis runs about 54.0 million dollars, a figure that rises to roughly 163 million dollars once operating-lease obligations are folded in, and operating profit covers the interest bill about 25 times over on either basis. The share count has been falling for four years. What the balance sheet buys the company is the ability to be wrong about a deal or two without the equity holder paying for it, and given that acquisitions are the stated strategy, that is not a small thing.

Catalysts

Second-quarter results are scheduled for July 28, 2026, and they arrive with a specific question attached rather than a general one. The first quarter, reported on April 28, 2026, carried sales growth of about 10% with margin expansion across the segments. The distribution arm's step up in profitability during 2025 was the single largest contributor to consolidated improvement, so a second consecutive quarter of it would change how durable that gain looks.

Capital allocation has been moving in the meantime. The board raised the quarterly dividend 5.7% to $0.28 a share on April 27, 2026, and in May the company completed the purchase of Wood Bros., a Nebraska distributor. Both actions fit the pattern the 10-K describes, in which growth arrives partly through bolt-on acquisition and cash returns rise alongside it. Neither is large enough on its own to move the consolidated numbers; together they indicate management is comfortable spending and returning at the same time.

Guidance itself is worth watching for tone rather than level. Across the record since 2008 management has raised its outlook on five occasions, cut it on three, reaffirmed it on ten and withdrawn it once, which is the profile of a team that sets targets it expects to meet rather than targets that stretch. Against a share price embedding growth well above what the company delivered last year, a reaffirmation would read differently than it usually does.

Peer Cohorts (Per Segment, With Filing Citations)

Water Systems (reported)

• XYL (Xylem Inc.)
• FY2025 10-K: …with product offerings in the filtration and separation, disinfection, and wastewater solutions, for municipal and industrial applications. In the Water Infrastructure segment we reach customers indirectly, through channel partners and distributors, directly and through our service capabilities. • Applied Water…
• FY2025 10-K: …the water cycle for our customers through cloud-based analytics, remote monitoring and data management with the purpose of optimizing their operating efficiency. In the Measurement and Control Solutions segment, we generate our sales through a combination of long-standing relationships with leading distributors and…
• PNR (Pentair plc)
• FY2025 10-K: …and infrastructure flow and industrial solutions businesses have not historically been impacted by seasonal weather trends. This change does not impact the competitive landscape of the Flow segment. Water Solutions The Water Solutions segment aims to provide great tasting, higher-quality water and ice while helping…
• FY2025 10-K: …separation technologies for the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray. • Water Solutions - The focus of this segment is to provide great…
• WTS (WATTS WATER TECHNOLOGIES INC)
• FY2025 10-K: …EPDs for any product produced at our facility in Franklin. In 2025, we expanded this effort globally. BLÜCHER in Denmark now offers EPDs for its drains, channels and piping products, and we also have EPDs for underfloor heating manifolds manufactured in Landau, Germany, providing customers with vital environmental…
• FY2025 10-K: 024-12-31 0000795403 us-gaap:CommonClassAMember 2023-07-31 0000795403 2025-10-01 2025-12-31 0000795403 2025-06-29 0000795403 us-gaap:CommonClassBMember 2026-01-25 0000795403 us-gaap:CommonClassAMember 2026-01-25 0000795403 2025-01-01 2025-12-31 xbrli:shares iso4217:USD iso4217:USD xbrli:shares xbrli:pure wts:segment…
• MWA (MUELLER WATER PRODUCTS, INC.)
• FY2025 10-K: …Index to Financial Statements Water Management Solutions Net sales for 2025 were $604.8 million as compared with $559.2 million in the prior year, an increase of $45.6 million or 8.2%, primarily as a result of higher sales volumes in hydrants and repair and installation products as well as higher pricing across most…
• FY2025 10-K: …to offer non-invasive leak detection and pipe condition assessment services is a key competitive advantage. With our Singer Valve and i2O products, we provide a range of intelligent water solutions including pressure control valves, advanced pressure management, network analytics, event management and data logging.…
• GRC (The Gorman-Rupp Company)
• FY2025 10-K: …Many of the larger units comprise encased, 3 Table of Contents fully-integrated water and wastewater pumping stations. In certain cases, units are designed for the inclusion of customer-supplied drives. The Company's larger pumps are sold principally for use in the construction, industrial, water and wastewater…
• FY2025 10-K: …(1) loss of key personnel; (2) intellectual property security; (3) growth through acquisitions; (4) the Company's indebtedness and how it may impact the Company's financial condition and the way it operates its business; (5) impairment in the value of intangible assets, including goodwill; (6) defined benefit pension…
• IEX (IDEX CORP)
• FY2025 10-K: …process. The CODM considers Adjusted EBITDA budget and forecast-to-actual variances when making decisions about the allocation of operating and capital resources to each segment. Adjusted EBITDA is also used in determining the compensation of certain employees. 68 Table of Contents The HST segment designs, produces…
• FY2025 10-K: …agriculture and semiconductor businesses, partially offset by higher volume in the municipal water businesses, which together more than offset the benefit of positive price across the segment. • Adjusted EBITDA margin increased primarily due to positive price/cost as well as net productivity improvements. These…
• FLS (FLOWSERVE CORP)
• FY2025 10-K: …short-term and long-term initiatives and accelerates growth through three key areas: diversification, decarbonization, and digitization (the "3D Strategy"). The goal of our 3D Strategy is to utilize our leadership in the flow control industry, and through our commitment to research and development ("R&D"), create…
• FY2025 10-K: …this Annual Report. Business Functions Our business segments share a focus on industrial flow control technology and have a number of common customers. These segments also have complementary product offerings and technologies that are often combined in applications that provide us a net competitive advantage. Our…

Distribution (reported)

• DXPE (DXP Enterprises, Inc.)
• FY2025 10-K: …website address does not constitute incorporation by reference of the information contained on the website and such information should not be considered part of this report. 5 Table of Contents Industry Overview The industrial distribution market is highly fragmented. Based on 2024 sales as reported by Industrial…
• FY2025 10-K: …awards, options, investment rights, and cash-based awards. Restricted Stock Awards The Company grants restricted stock awards ("RSAs") to employees and non-employee directors. RSAs qualify as participating securities as each award contains non-forfeitable rights to dividends. RSAs are considered outstanding at the…
• DNOW (DNOW INC.)
• FY2025 10-K: …The emphasis that both our customers and suppliers place on our AML helps secure our central and critical position in the global PVF supply chain. We utilize a variety of freight carriers in addition to our corporate truck fleet to ensure timely and efficient delivery of our products. With respect to deliveries of…
• FY2025 10-K: …The customer service representatives develop order packages based on specific customer needs, interface with manufacturers to determine product availability, ensure on-time delivery and establish pricing of materials and services based on guidelines and predetermined metrics established by management. Operations Our…
• POOL (POOL CORPORATION)
• FY2025 10-K: …support, information systems support, support from our logistics and fleet teams, accounting and financial analysis support and expert resources to help them achieve their goals. We believe our incentive programs and feedback tools, along with the competitive nature of our sales center network, stimulate and enhance…
• FY2025 10-K: …existing sales center networks and customer and vendor relationships to drive growth for this market. Operating Strategy We distribute swimming pool supplies, equipment and related leisure products domestically through our SCP and Superior sales center networks and internationally through our SCP network. We adopted…
• SITE (SiteOne Landscape Supply, Inc.)
• FY2025 10-K: …center going forward. The South Middleton, Pennsylvania distribution center is approximately 306,000 square feet and is expected to commence operations in the second quarter of 2026. As of December 28, 2025, we operated distribution centers in the following locations: Location Approximate Square Footage Commenced…
• FY2025 10-K: …and nursery plants. Locations offering nursery goods have water distribution systems to maintain inventories, and many of these locations have access to municipal water supplies, wells, or ponds. Branches are strategically located near residential areas with convenient highway access. In-store merchandising displays…
• WCC (WESCO International, Inc.)
• FY2025 10-K: …dated as of April 14, 2023, by and among WESCO Distribution, Inc., the other U.S. borrowers party thereto, WESCO Distribution Canada LP, the other Canadian borrowers party thereto, WESCO International, Inc., the lenders party thereto and Barclays Bank PLC., as administrative agent Incorporated by reference to Exhibit…
• FY2025 10-K: …Inc. Retirement Savings Plan"), which provides employer matching contributions. Contributions are made in cash and employees have the option to transfer balances allocated to their accounts into any of the available investment options. The WESCO Distribution, Inc. Retirement Savings plan provides an employer matching…

Energy Systems (reported)

• DOV (DOVER Corp)
• FY2025 10-K: Climate & Sustainability Technologies. For financial information about our segments and geographic areas, see Note 19 - Segment Information in the consolidated financial statements in Item 8 of this Form 10-K. Engineered Products Our Engineered Products segment provides a wide range of equipment, components, software,…
• FY2025 10-K: …and trade volumes; an increased global focus on digitization and automation in industrial processes; increasing requirements for sustainability, safety, energy efficiency and consumer product safety; and growth of the middle class and consumption in emerging economies. • Our Engineered Products segment is…
• ITT (ITT INC.)
• FY2025 10-K: …financial statements upon adoption. NOTE 3 SEGMENT INFORMATION The Company's segments are reported on the same basis used by our chief operating decision maker (CODM) for evaluating performance and for allocating resources. The Company's CODM is the President and Chief Executive Officer. The CODM allocates resources…
• FY2025 10-K: …IT system failure, cyber-attack, equipment failure, labor dispute, natural disaster, power outage, flood, fire, explosion, act of terrorism, relocation of production location or any other catastrophic event or reason, our ability to meet customer demand for our products may be impacted. We have business continuity…
• GTLS (CHART INDUSTRIES, INC.)
• FY2025 10-K: …LNG. Management believes that continuing efforts by petroleum producing countries to better utilize stranded natural gas and associated gases which historically had been flared, present a promising source of demand. We have several competitors for our air cooled heat exchangers and fans, including many smaller…
• FY2025 10-K: …the storage, distribution, vaporization, and application of industrial gases and certain hydrocarbons. Our Heat Transfer Systems segment supplies mission critical engineered equipment and systems used in the recovery, separation, liquefaction, and purification of hydrocarbons, LNG and industrial gases that span…

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.