FLOWSERVE CORP (FLS): what the price requires

At today's price, FLOWSERVE CORP (FLS) is priced for +22.1% 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/FLS

Headline

FieldValue
TickerFLS
CompanyFLOWSERVE CORP
Current price$68.33/sh
CompositionOriginal Equipment 47% / Aftermarket 53%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Implied growth22.1%
Multiple paid21x operating income

Solve inputs: computed at a 9.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.1pp.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.59σ
cohort percentile (of 225 peers)45
sustained it ~5 years at this level34%
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
Asset2.11x5expensive
Earnings3.11x5expensive
Relative0.76x5justifies
Growth1.17x3expensive

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 7.8%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$44.041.55xyesFCF base $0.4B, growth 1% (input: historical growth), terminal g 0.8%, WACC 7.8%, 5yr projection
DCF Exit MultipleGrowth$78.860.87xyesExit EV/EBITDA: 20.1x / 22.1x / 24.1x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$45.801.49xyesP/E 18x (static sector reference · 2026-04), scenarios: 15.3x / 18.0x / 20.7x (bear / base = reference held flat / bull), EV/EBITDA 15.04x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$29.762.30xyesBV/sh $17.20, ROE (TTM) 16.0%, ke 9.3%
Two-Stage Excess ReturnAsset$38.641.77xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$58.461.17xyesRev $4.7B, growth 1% (input: historical growth; tapered), Terminal P/S: 1.6x / 1.9x / 2.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$95.200.72xyesEPS $2.72, growth 35% (input: historical EPS growth), PEG=0.71 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$18.533.69xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.37B × (1−21%) / WACC 7.8% → EPV (no growth)
Residual IncomeAsset$39.281.74xyesBV $17.20 + 5yr PV of (ROE (TTM) 16.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$32.442.11xyes√(22.5 × EPS $2.72 × BVPS $17.20) — Graham's conservative floor
EV/EBITDA RelativeRelative$30.332.25xyesEBITDA $0.48B × sector EV/EBITDA 12.0x
FCF YieldEarnings$22.003.11xyesFCF $436.6M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$18.623.67xyesSBC-adj FCF $0.40B (FCF $0.44B − SBC $0.04B) capitalized at Kₑ
Ben Graham FormulaEarnings$87.770.78xyesEPS $2.72 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$5.1013.40xyesBV $17.20 × (ROIC 2.3% / WACC 7.8%)
P/Sales SectorRelative$90.440.76xyesRevenue $4.65B × sector P/S 2.5x
PEG Fair ValueRelative$102.000.67xyesEPS $2.72 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$29.412.32xyesEPS $2.72 / 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$1.0b
Net debt / NOPAT (after-tax)2.75x
Net debt / operating income (pre-tax)2.17x
Interest coverage6.1x
Share count CAGR (buyback)-0.3%
Burning cashno

Bullet Takeaways

What the standard models miss in Flowserve is the aftermarket. More than half of revenue comes from parts and service on a vast installed base of pumps, valves, and seals, a recurring stream that a static earnings or book-value snapshot undervalues because it does not capture how sticky it is.

The price near $81.77 works out to about 24 times company-wide operating income, which is a full multiple. The inversion reads that as elevated: the price implies the company holds a high growth rate near its self-funding ceiling for nearly six years, and only about a quarter of comparable companies have sustained that pace that long.

The recent quarter showed the bull mechanism at work, adjusted operating margin expanding to 15.1% and adjusted earnings up about 18%, even as revenue fell 7%. The bet is margin and aftermarket quality, not volume growth, and the full-year adjusted earnings outlook of $4.00 to $4.20 is the test.

Bull Case

The traditional valuation models do not capture what Flowserve actually is, and that gap is the bull case. On book value and snapshot earnings the company looks ordinary: a mid-margin industrial trading at a rich multiple. But more than half of revenue, around 53%, comes from the aftermarket, the parts and service business that lives on a massive installed base of pumps, valves, and mechanical seals already running in refineries, chemical plants, and power stations around the world. That revenue recurs because the equipment must keep running; the filing ties aftermarket demand to "the reliability of equipment, planned and unplanned downtime for maintenance and the required capacity utilization of the process" [FY2025 10-K, accession 0000030625-26-000003]. A book-value model treats that installed base as cost; the market correctly treats it as an annuity.

The recent results show why the quality matters more than the top line. In the first quarter of 2026 revenue fell about 7% to $1.1 billion, yet adjusted operating margin expanded 230 basis points to 15.1%, adjusted gross margin reached 37.2%, up 370 basis points, and adjusted earnings rose about 18% to $0.85. A business that grows earnings double digits while revenue declines is converting mix and operational improvement into profit, which is exactly what an installed-base franchise does well. Bookings of $1.15 billion, including over $110 million of nuclear and $680 million of aftermarket, kept backlog robust at roughly $2.95 billion, the eighth consecutive quarter of aftermarket bookings above $600 million.

The end-market tailwind is real and durable. Flowserve is positioned for nuclear power and the surge in electricity demand from AI data centers, both of which require exactly the kind of flow-control equipment it makes. Management reaffirmed full-year 2026 adjusted earnings guidance of $4.00 to $4.20, about 13% growth, and pointed to AI-related power and nuclear demand as supports for its longer-term targets. The aborted merger with Chart Industries, which was terminated, leaves Flowserve as a focused standalone with strong margins and an activist, Starboard, pressing for further value creation. The competitive set, named in the filing as Sulzer, Ebara, Eagle Burgmann, and John Crane [FY2025 10-K, accession 0000030625-26-000003], is rational and consolidated, which supports pricing.

Bear Case

The clearest way to frame the bear case is the disagreement among the valuation methods, because the conservative ones are likely telling the more honest story. The asset-based and earnings-power frames land far below the price. The simple and two-stage excess-return methods anchor in the high-$20s to high-$30s off a book value of $17.20, the earnings-power method lands near $17 because normalized operating income is modest, and the FCF-yield frame lands near $22. Those are the methods that do not extrapolate recent growth, and they all say the price is well above what the current business earns on its capital. The frames that reach the price are the ones leaning on continued high growth and a premium exit multiple. When the optimistic, growth-extrapolating methods are the only ones that justify a price, the conservative methods are usually the better guide.

The growth that the price assumes is not currently visible in the top line. Revenue fell 7% in the first quarter and original-equipment revenue dropped 18%, and management trimmed its 2026 sales growth outlook to 3% to 6%. The earnings growth has come almost entirely from margin expansion, and margin expansion has a ceiling; you cannot improve mix and efficiency forever. The price, at about 24 times operating income, implies the company sustains a high growth pace near its self-funding ceiling for nearly six years, which the framework flags as elevated, with only about 27% of comparable companies having held that pace that long. If margin gains plateau and revenue stays soft, the earnings growth that justifies the multiple stalls.

The business is also cyclical and carries debt. Flowserve's customers are energy, chemical, and industrial companies, and the filing notes their fortunes depend on "the condition of global credit and capital markets" and that order patterns "have been inherently more influenced by pricing and domestic and global economic conditions" [FY2025 10-K, accession 0000030625-26-000003]. Net debt runs around three and a half times operating profit with interest coverage near five, so the balance sheet has less room than the strong-margin narrative implies. A downturn in energy or chemical capital spending would hit original-equipment orders first and eventually the aftermarket, and the conservative methods that already sit below the price would become the relevant ones.

Valuation

Flowserve is valued as a whole company off its operating income, and the read is elevated. At about $81.77 (June 27, 2026) the price works out to roughly 24 times company-wide operating profit, which inverts to an assumption that the company holds growth near its self-funding ceiling for about six years. That is a single solve under a 10% cost of capital, so it is approximate, but it lands clearly above what the fundamentals comfortably support, with the framework noting only about 27% of comparable fast-growers sustained that pace that long.

The X-ray is sharply split, and the split is the information. The methods that reach or exceed the price are the growth and relative ones: the DCF-exit-multiple frame lands near $90 on a high exit multiple, the discounted-future-market-cap frame lands near $70, and the growth-adjusted PEG and Peter Lynch frames land high on the company's strong historical EPS growth. The methods that sit well below the price are the conservative ones: excess return in the high-$20s to high-$30s, earnings power near $17, residual income near $39, and FCF yield near $22. The characterization is that relative-multiple and growth-DCF justify the price while asset-based and earnings-power say it is expensive. The honest reading is that you are paying a quality premium for the aftermarket franchise and the margin trajectory, not buying a cheap stock.

The resolution hinges on durability. If the aftermarket annuity and the nuclear and AI-power demand keep the margin expansion and earnings growth going, the growth methods are right and the premium is earned. If revenue stays soft and margin gains plateau, normalized earnings drift toward the conservative anchors that sit far below the price. The full-year adjusted earnings guidance of $4.00 to $4.20 is the near-term checkpoint on which side of that the business lands.

Catalysts

The most important recent development was a non-event that became an event: the proposed merger of equals with Chart Industries was terminated, with Chart's stockholders instead approving a combination with Baker Hughes. Flowserve incurred transaction costs tied to the termination but remains a focused standalone industrial, which simplifies the story and puts the spotlight back on operating results and capital allocation, the latter now under pressure from activist Starboard.

The first-quarter 2026 results were the operational catalyst. Flowserve reported bookings of $1.15 billion, including over $110 million of nuclear and $680 million of aftermarket, adjusted operating margin of 15.1% up 230 basis points, GAAP earnings of $0.64 and adjusted earnings of $0.85 up about 18%, even as revenue fell 7% to $1.1 billion on weaker original-equipment conversion. Management reaffirmed full-year adjusted earnings guidance of $4.00 to $4.20 while trimming the sales growth outlook to 3% to 6%, and kept backlog robust near $2.95 billion. Each quarter is a test of whether margin expansion and bookings growth continue.

The forward catalysts are the secular demand themes and the activist. Nuclear power, including new builds and life extensions, and the electricity demand from AI data centers are the end markets management points to for its longer-term targets, and bookings momentum in those areas is the leading indicator to watch. On the capital side, Starboard's involvement raises the odds of portfolio or capital-return moves. The watch items are original-equipment booking trends, the durability of aftermarket above $600 million a quarter, and any softening in energy or chemical capital spending that would pressure orders.

Sources: Flowserve Q1 2026 results, Flowserve IR; Flowserve reaffirms 2026 EPS outlook, TipRanks; Chart-Flowserve merger termination context, GuruFocus; Flowserve Q1 2026 8-K, SEC; Flowserve value-creation commitment, Starboard, BusinessWire.

Peer Cohorts (Per Segment, With Filing Citations)

Flowserve Pump Division (FPD) (reported)

Flow Control Division (FCD) (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 FLS report on boothcheck