ITT INC. (ITT): what the price requires

At today's price, ITT INC. (ITT) is priced for today's economics sustained for ~6.5 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/ITT

Headline

FieldValue
TickerITT
CompanyITT INC.
Current price$193.29/sh
CompositionAuto and rail 36% / Chemical and industrial pumps 24% / Aerospace and defense 18% / General industrial 6% / Energy 15%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed12.8%
Operating margin today15.8%
Margin compression implied-3.0pp
Must persist for6.5y
Multiple paid33x 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 9.2% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.

How unusual the bet is: elevated

ReferenceValue
vs own history+0.56σ
cohort percentile (of 225 peers)73
sustained it ~6.5 years at this level24%
implied end-window share0%

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.

FamilyMedian price/FVModelsReads
Asset3.35x4expensive
Earnings7.55x2expensive
Relative1.60x3expensive
Growth0.98x1justifies

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.6%); the inversion above states its own rate.

Per-Model Detail (n=10)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$0.00—noNegative/zero FCF — equity value floored at $0
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$127.691.51xyesP/E 23.73x (blended: static sector reference 18x + trailing (TTM) 37x), scenarios: 19.3x / 23.7x / 28.1x (bear / base = reference held flat / bull), EV/EBITDA 15.71x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$56.343.43xyesBV/sh $53.96, ROE (TTM) 9.7%, ke 9.3%
Two-Stage Excess ReturnAsset$57.553.36xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$197.810.98xyesRev $4.2B, growth 17% (input: historical growth; tapered), Terminal P/S: 3.3x / 4.0x / 4.7x (bear / base = today's held flat / bull, cap 12x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$16.1711.95xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.59B × (1−38%) / WACC 7.6% → EPV (no growth)
Residual IncomeAsset$57.763.35xyesBV $53.96 + 5yr PV of (ROE (TTM) 9.7% − Kₑ 9.3%) × BV; BV grows 6.3%/yr
Graham NumberAsset$82.972.33xyes√(22.5 × EPS $5.67 × BVPS $53.96) — Graham's conservative floor
EV/EBITDA RelativeRelative$75.812.55xyesEBITDA $0.83B × sector EV/EBITDA 12.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$4.7540.69xyesEPS $5.67 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$7.6725.20xyesBV $53.96 × (ROIC 1.1% / WACC 7.6%) (excluded from median)
P/Sales SectorRelative$120.651.60xyesRevenue $4.24B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$61.303.15xyesEPS $5.67 / 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$3.7b
Net debt / NOPAT (after-tax)9.34x
Net debt / operating income (pre-tax)5.76x
Interest coverage11.1x
Share count CAGR (dilution)0.8%
Burning cashno

Bullet Takeaways

Bull Case

The case for ITT starts with the quality of its competitive positions, because that is what the price is really paying for. The company does not sell commodity parts; it sells highly engineered components that get designed into customers' platforms and stay there for the life of the program. The 10-K describes the source of advantage directly as "the highly customized application engineering embedded within our products, our proprietary rights, our knowledge capabilities and our brand recognition," which is the language of switching costs and specification lock-in. In friction, ITT supplies brake pads as original equipment on passenger cars through brands like ITT Friction Technologies, KONI, and Axtone, where being designed onto a vehicle platform means years of follow-on aftermarket and replacement revenue.

The return profile backs the moat claim. ITT runs an adjusted operating margin guided to the high teens to roughly 20% for 2026, with management targeting 30 to 120 basis points of expansion, and it earns returns on capital well above its cost of capital, which is precisely why the static valuation frames look stretched: methods that capitalize today's earnings with no growth cannot price a business that has compounded margins and share gains for years. First-quarter revenue rose 33%, with 11% organic growth driven by aerospace and defense in the connectors business, share gains in motion technologies, and momentum in pumps and valves. That breadth across auto, rail, process, and defense end markets smooths the cycle that would whipsaw a single-end-market industrial.

The SPX FLOW acquisition is the growth engine the price is underwriting. Closed a month ahead of schedule, it created a combined Flow Technologies segment positioned as a global leader in critical flow solutions, is expected to deliver low-teens adjusted EPS accretion in 2026, and is on track to capture a third of $80 million in cost synergies in the first year. Management initiated full-year adjusted EPS guidance of $7.70 to $8.00, up 9% at the midpoint, with total revenue up 36% to 38% including the deal. The forward-growth method that reaches the current price is, in effect, crediting ITT for being a serial compounder that integrates acquisitions and expands margins, which is exactly the track record the moat language in the filing is meant to defend.

Bear Case

The structural vulnerability in ITT today sits on the right side of the balance sheet. To buy SPX FLOW, the company took leverage to about 2.7 times, and it now carries roughly $4.3 billion of gross debt against only about $600 million of liquid assets, leaving net debt near $3.7 billion. That is a different ITT from the lightly-levered compounder of recent years. Net debt now runs above five times trailing operating income, and while interest coverage near ten times looks comfortable today, the cushion was built before the new debt and the integration costs fully season. A levered balance sheet narrows the room to absorb a downturn in the cyclical auto, rail, and process end markets that supply most of the revenue, and it makes the company dependent on the deal delivering its promised cash flows on schedule.

The integration itself is the fragility multiplier. The 10-K flags that uncertainty about the effect of an acquisition on "customers, suppliers, employees and other constituencies may have a material adverse effect," and a deal this size, closed quickly, carries real execution risk: synergy targets can slip, customer overlap can leak revenue, and management attention gets pulled toward integration just as several end markets face their own pressures. ITT also depends on a supply chain it does not fully control, noting risks from suppliers' ability to provide "sufficient quality or flow of materials" and from price increases and re-qualification delays, all of which hit harder when leverage leaves less margin for error.

Then there is the valuation, which is where the balance-sheet risk and the price meet. The static methods are unanimous that the stock is rich: the earnings-power value is a small fraction of the price, the asset and excess-return methods land in the mid-fifties, and even the peer-multiple methods sit well below $197. Only the forward-growth method reaches the price, and it does so by assuming durable high-single-digit compounding plus full delivery of the acquisition's accretion and synergies. The framework reads this as elevated, with the durability premium tripping its rarity flag. The danger is the combination: a price that already prices in successful compounding, layered on top of a balance sheet that just took on meaningful debt to fund the very growth the price assumes. If integration disappoints or the cyclical end markets soften while leverage is elevated, the stock has a long way to fall back toward where the static methods say it belongs.

Valuation

ITT is the textbook elevated case in this framework: at $196.86, only the forward-growth method reaches the price, while the asset, earnings-power, and peer-multiple families all say richly valued. The earnings-power value, capitalizing normalized operating profit with no growth, is a small fraction of the price; the excess-return and residual-income methods cluster in the mid-fifties; relative valuation lands near $129 and EV/EBITDA near $76. The discounted-future-market-cap method, which projects revenue forward and applies a terminal multiple, is the lone family that reaches roughly $201, essentially today's price. The blended figure across the static methods is around $58, which is the framework's way of saying the price embeds a large premium for durability the present numbers cannot justify.

The inversion makes that premium concrete. Rather than implying a specific one-year growth rate, the price implies an unusually long runway of above-average operating margins, with an implied margin near 12% sustained over a roughly seven-year duration. In plain terms, the market is paying for ITT to keep compounding at high returns for years, integrating acquisitions and expanding margins the way it has. That is a coherent bet given the track record and the moat language in the filing, but it is a bet, and the rarity check flags the price as elevated, with the durability assumption tripping a flag rather than sitting comfortably in range.

The balance sheet is now part of the valuation story, not just the risk section. The SPX FLOW deal lifted leverage to about 2.7 times, with net debt near $3.7 billion against about $600 million of liquid assets and net debt above five times operating income. Interest coverage near ten times is still adequate, but the financial structure that funds the growth the price assumes is itself more fragile than before. The published analyst response to the quarter was positive and the stock rose on the print, but the price already reflects the optimistic path.

Catalysts

The defining event was the SPX FLOW acquisition, which closed on March 2, a month ahead of schedule, and reshaped ITT into a larger, more flow-focused industrial. The company folded its Industrial Process unit together with SPX FLOW to form a new Flow Technologies segment positioned as a global leader in critical flow solutions, took leverage to about 2.7 times, and guided the deal to low-teens adjusted EPS accretion in 2026 with a third of $80 million in cost synergies expected in the first year.

The first-quarter print beat and the stock rose. ITT reported revenue of $1.2 billion, up 33% (11% organic) on aerospace and defense strength, motion-technologies share gains, and pumps-and-valves momentum, with adjusted EPS of $1.98 ahead of the roughly $1.72 consensus. Management initiated full-year adjusted EPS guidance of $7.70 to $8.00, up about 9% at the midpoint, with organic revenue growth of 4% to 6% and adjusted operating margin of 19.7% to 20.6%. The catalysts that matter from here are the integration milestones, specifically whether the synergy capture and accretion track to plan, the trajectory of organic orders in the cyclical auto, rail, and process markets, and the pace of deleveraging back toward the company's historical range. Those integration and deleveraging proof points are what determine whether the durability premium in the price is earned.

Peer Cohorts (Per Segment, With Filing Citations)

Motion Technologies (reported)

Industrial Process (reported)

Connect & Control Technologies (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.

Sources

ITT Q1 2026 earnings, BusinessWire / Investing.com, May 2026 · ITT Q1 2026 earnings, BusinessWire, May 2026 · ITT Q1 2026 earnings, Nasdaq / BusinessWire, May 2026 · ITT Q1 2026 earnings, Investing.com, May 2026 · ITT Q1 2026 earnings, BusinessWire / Nasdaq, May 2026

View the full interactive ITT report on boothcheck