The Gorman-Rupp Company (GRC): what the price requires
At today's price, The Gorman-Rupp Company (GRC) is priced for today's economics sustained for ~5.5 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/GRC
Headline
| Field | Value |
|---|---|
| Ticker | GRC |
| Company | The Gorman-Rupp Company |
| Current price | $78.44/sh |
| Composition | Industrial 21% / Fire 19% / Agriculture 12% / Construction 11% / Municipal 15% / Petroleum 4% / OEM 7% / Repair parts 12% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 8.3% |
| Operating margin today | 14.2% |
| Margin compression implied | -5.9pp |
| Must persist for | 5.5y |
| Multiple paid | 24x 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 9.9% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.7 years.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +1.07σ |
| cohort percentile (of 225 peers) | 57 |
| sustained it ~5.5 years at this level | 28% |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.75x | 5 | expensive |
| Earnings | 3.16x | 5 | expensive |
| Relative | 1.19x | 5 | expensive |
| Growth | 1.15x | 3 | expensive |
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 8.3%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $68.43 | 1.15x | yes | FCF base $0.1B, growth 5% (input: historical growth), terminal g 4.0%, WACC 8.3%, 6yr projection |
| DCF Exit Multiple | Growth | $73.36 | 1.07x | yes | Exit EV/EBITDA: 16.1x / 18.1x / 20.1x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $55.72 | 1.41x | yes | P/E 23.15x (blended: static sector reference 18x + trailing (TTM) 35x), scenarios: 19.4x / 23.1x / 26.9x (bear / base = reference held flat / bull), EV/EBITDA 13.84x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $24.11 | 3.25x | yes | BV/sh $16.16, ROE (TTM) 13.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $29.15 | 2.69x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $58.69 | 1.34x | yes | Rev $0.7B, growth 5% (input: historical growth; tapered), Terminal P/S: 2.5x / 3.0x / 3.5x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $78.40 | 1.00x | yes | EPS $2.24, growth 35% (input: historical EPS growth), PEG=1.01 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $17.26 | 4.54x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.07B × (1−20%) / WACC 8.3% → EPV (no growth) |
| Residual Income | Asset | $30.13 | 2.60x | yes | BV $16.16 + 5yr PV of (ROE (TTM) 13.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $28.54 | 2.75x | yes | √(22.5 × EPS $2.24 × BVPS $16.16) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $48.54 | 1.62x | yes | EBITDA $0.13B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $26.34 | 2.98x | yes | FCF $88.5M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $24.82 | 3.16x | yes | SBC-adj FCF $0.08B (FCF $0.09B − SBC $0.00B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $72.28 | 1.09x | yes | EPS $2.24 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $6.25 | 12.55x | yes | BV $16.16 × (ROIC 3.2% / WACC 8.3%) |
| P/Sales Sector | Relative | $65.97 | 1.19x | yes | Revenue $0.70B × sector P/S 2.5x |
| PEG Fair Value | Relative | $84.00 | 0.93x | yes | EPS $2.24 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $24.22 | 3.24x | yes | EPS $2.24 / 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 | $263.3m |
| Net debt / NOPAT (after-tax) | 3.35x |
| Net debt / operating income (pre-tax) | 2.69x |
| Interest coverage | 4.3x |
| Share count CAGR (dilution) | 0.2% |
| Burning cash | no |
Bullet Takeaways
- No valuation family reaches the $87.53 price. The growth-DCF methods land near $66 to $80, the relative methods near $48 to $66, and the asset and earnings-power methods far below, between $17 and $30, so the price is a premium for quality the standard frames do not capture.
- Capital allocation is conservative and shareholder-friendly: Gorman-Rupp has a long record of dividend increases, it paid down $15 million of bank debt in the quarter while funding the $0.19 dividend, and it carries interest coverage near 4.5x.
- The first quarter was strong: net sales rose 7.7% to $176.6 million, EPS of $0.68 beat the $0.49 estimate, gross margin expanded to 32.5% from 30.7%, and the backlog stood at a healthy $247.9 million.
Bull Case
The clearest way to read Gorman-Rupp is through how it allocates capital, because the discipline is the whole investment case. This is a company that pays a steadily rising dividend, funded comfortably from operating cash flow, and uses the rest to pay down debt and reinvest in its own manufacturing rather than chasing acquisitions or financial engineering. In the first quarter it generated $22.0 million of operating cash flow, funded $4.3 million of capital spending and $5.0 million of dividends, and still reduced bank debt by $15.0 million. That order of priorities, fund the dividend, invest modestly in the business, then deleverage, is the signature of management that thinks in decades and values the balance sheet. For a family-influenced industrial with a long dividend record, the buyback-free, debt-reduction approach signals confidence in the durability of the cash flows rather than a need to manufacture per-share growth.
The business behind that discipline is a high-quality niche franchise. Gorman-Rupp designs and manufactures pumps and pumping systems for water, wastewater, construction, industrial, and firefighting applications, including, as the FY2025 10-K describes, "encased, fully-integrated water and wastewater pumping stations" sold for construction, industrial, and municipal water uses (FY2025 10-K, accession 0001193125-26-084820). Water and wastewater infrastructure is a long-cycle, replacement-driven end market with regulatory tailwinds, and a meaningful share of revenue comes from repair parts, which is recurring and high-margin. That mix is why the company can hold a gross margin above 32% and why the demand is steadier than a typical capital-goods name.
The recent results show the franchise compounding. First-quarter net sales rose 7.7% to $176.6 million, beating estimates, and EPS of $0.68 far exceeded the $0.49 estimate and rose from $0.46 a year earlier, helped by gross margin expanding to 32.5% from 30.7% on better labor and overhead leverage and a richer product mix. Adjusted EBITDA grew to $35.5 million, and the backlog of $247.9 million provides forward visibility. The valuation premium is real, with no method reaching the price, but it reflects the market paying for a durable, dividend-growing infrastructure compounder. The inverted read frames the embedded assumption as operating growth sustained for roughly six years, demanding but not extreme for a business with this consistency, and analysts forecast mid-teens earnings growth that would help close the gap to the price.
Bear Case
The bear case has to look for moat erosion, because the price assumes the franchise stays as durable as it has been, and there are places where that durability could be chipped away. Gorman-Rupp's edge is a reputation for reliable, application-engineered pumps and a large installed base that drives recurring repair-parts revenue. That moat is real but not impregnable. Larger, better-capitalized flow-control competitors, the kind with broader product lines and global distribution, can target the same municipal and industrial accounts, and the commoditized end of the pump market, where price competition is fiercest, is always pressing on the margins of the more specialized lines. If the product mix drifts toward more competitive, lower-margin applications, the above-32% gross margin that justifies the premium would compress, and the recurring parts annuity erodes if the installed base ages out to competitors' equipment.
The valuation leaves no room for that erosion. No valuation family reaches the price: the asset-based methods land between $24 and $30, the earnings-power value near $17, and even the most generous growth-DCF only reaches about $80, all against a $87.53 price (June 27, 2026). The stock trades at a price-to-earnings multiple near 35x against an estimated fair multiple closer to 23x, which is a substantial premium that depends on the quality and growth holding precisely as the bull case assumes. The implied duration of roughly six years of sustained growth is demanding for a slow-growing infrastructure supplier, and the framework characterizes the embedded assumption as elevated, above what the fundamentals comfortably support.
The end markets, while steady, are not immune to the cycle. Construction and industrial demand soften in a downturn, municipal water budgets are subject to public-funding cycles, and tariff and input-cost pressure can squeeze the margin that the quarter's improvement reflected. Gorman-Rupp carries about $293 million of gross debt with interest coverage near 4.5x, comfortable but not fortress-like, so a demand slowdown would pressure both the deleveraging and the dividend growth that anchor the bull case. A great niche industrial can still be a poor investment when the price already capitalizes a long run of uninterrupted compounding, and the methods that anchor to current earnings power sit a long way below the current price.
Valuation
Gorman-Rupp's X-ray has a consistent shape: no family reaches the price, which marks it as a quality premium the static methods cannot capture. The asset-based methods land lowest, with the simple and two-stage excess-return methods near $24 and $29, residual income near $30, and the Graham number near $29. The earnings-power value lands near $17 and the free-cash-flow methods near $25 to $26. The relative methods land in the middle, with a peer-multiple method near $59 and an EV/EBITDA method near $49. The growth-DCF methods land highest but still below the price, with a perpetual-growth DCF near $67 and an exit-multiple DCF near $80.
The inverted view names the premium. The price embeds operating growth sustained for roughly six years on a whole-company basis, computed against the company's strong but moderate growth profile, and the framework characterizes the embedded assumption as elevated. Current operating margin near 14.5% is healthy, and the price assumes that profitability and growth persist. In plain terms, the market is paying up for consistency and an infrastructure-linked end market, not for a high growth rate.
The honest synthesis is that this is a high-quality niche compounder trading at a premium to every standard method. The bull case is that the recurring repair-parts revenue, the water and wastewater end markets, and the disciplined capital allocation make the durability real, in which case the premium is the cost of owning a steady compounder. The bear case is that the price, at roughly 35x earnings against a fair multiple near 23x, already capitalizes a long, smooth run, and the methods that anchor to current earnings sit far below. The value depends on the quality holding exactly as the market assumes, with little margin for a margin slip, a demand cycle, or competitive pressure on the franchise.
Catalysts
The clearest near-term catalyst is the margin and order trajectory: first-quarter gross margin expanded to 32.5% from 30.7% on better operating leverage and mix, and the $247.9 million backlog provides forward visibility, so each print is a test of whether the margin gains hold. End-market demand is the key external driver, with water and wastewater infrastructure spending, construction, industrial, and firefighting applications setting the pace; municipal water funding cycles and infrastructure investment are the structural tailwinds. Capital allocation is a standing catalyst, with a long dividend-increase record, the $0.19 quarterly dividend, and continued debt reduction ($15 million paid down in the quarter) signaling management confidence. Input costs and tariffs are a watch item on the margin side. The recurring repair-parts revenue is the moat to monitor, since its durability underpins the premium valuation. Sentiment is constructive but the valuation is full, with a Buy-leaning consensus, price targets that range widely from the high $60s to roughly $88, and a price-to-earnings multiple near 35x against an estimated fair multiple closer to 23x, so the stock needs continued earnings growth, forecast in the mid-teens, to grow into its premium rather than re-rate down toward it.
Sources: StockTitan 10-Q, StockStory Q1, Simply Wall St valuation, MarketBeat
Peer Cohorts (Per Segment, With Filing Citations)
Pumps and pump systems (consolidated) (reported)
- FLS (FLOWSERVE CORP)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- GGG (GRACO INC.)
- (no filing in the citation store)
- XYL (Xylem Inc.)
- (no filing in the citation store)
- ITT (ITT INC.)
- (no filing in the citation store)
- GTES (Gates Industrial Corporation plc)
- (no filing in the citation store)
- HLIO (HELIOS TECHNOLOGIES, INC.)
- (no filing in the citation store)
- MWA (MUELLER WATER PRODUCTS, INC.)
- (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.