LEAR CORP (LEA): what the price assumes
boothcheck covers LEAR CORP (LEA) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-06-27.
Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/LEA
Headline
| Field | Value |
|---|---|
| Ticker | LEA |
| Company | LEAR CORP |
| Current price | $147.98/sh |
| Composition | Seating 74% / E-Systems 26% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 1.5% |
| Operating margin today | 3.6% |
| Margin compression (value-band) | -2.1pp |
| Multiple paid | 11x operating income |
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.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 8.4% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.49σ |
| cohort percentile (of 212 peers) | 20 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
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 | 1.26x | 5 | expensive |
| Earnings | 0.95x | 4 | justifies |
| Relative | 0.40x | 5 | justifies |
| Growth | 0.78x | 3 | justifies |
Families that justify the price: Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.6%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $278.36 | 0.53x | yes | FCF base $0.7B, growth 3% (input: historical growth), terminal g 2.9%, WACC 8.6%, 5yr projection |
| DCF Exit Multiple | Growth | $188.88 | 0.78x | yes | Exit EV/EBITDA: 4.0x / 5.2x / 7.2x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $245.70 | 0.60x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.9x / 20.0x / 23.1x (bear / base = reference held flat / bull), EV/EBITDA 9.87x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $110.82 | 1.34x | yes | BV/sh $98.68, ROE (TTM) 10.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $117.22 | 1.26x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $118.03 | 1.25x | yes | Rev $23.5B, growth 3% (input: historical growth; tapered), Terminal P/S: 0.3x / 0.3x / 0.4x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $264.11 | 0.56x | yes | EPS $10.00, growth 26% (input: historical EPS growth), PEG=0.55 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $157.62 | 0.94x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.78B × (1−21%) / WACC 8.6% → EPV (no growth) |
| Residual Income | Asset | $118.41 | 1.25x | yes | BV $98.68 + 5yr PV of (ROE (TTM) 10.4% − Kₑ 9.3%) × BV; BV grows 6.8%/yr |
| Graham Number | Asset | $149.01 | 0.99x | yes | √(22.5 × EPS $10.00 × BVPS $98.68) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $368.86 | 0.40x | yes | EBITDA $1.46B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $155.02 | 0.95x | yes | FCF $732.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $322.67 | 0.46x | yes | EPS $10.00 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $46.09 | 3.21x | yes | BV $98.68 × (ROIC 4.0% / WACC 8.6%) |
| P/Sales Sector | Relative | $684.46 | 0.22x | yes | Revenue $23.52B × sector P/S 1.5x |
| PEG Fair Value | Relative | $375.00 | 0.39x | yes | EPS $10.00 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $108.11 | 1.37x | yes | EPS $10.00 / 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 | $1.9b |
| Net debt / NOPAT (after-tax) | 2.77x |
| Net debt / operating income (pre-tax) | 2.19x |
| Interest coverage | 8.5x |
| Share count CAGR (buyback) | -3.8% |
| Burning cash | no |
Bullet Takeaways
- Lear is a tier-one automotive supplier in two businesses: Seating, the larger and steadier piece, and E-Systems, which supplies the electrical architecture and connectivity that grows as cars electrify.
- Margins are thin by the nature of auto supply, seating adjusted margins around 6.9% and E-Systems around 6.1%, so the value comes from scale, a record backlog of new awards, and disciplined buybacks rather than fat profitability.
- The stock trades at a low multiple, around 11 times operating income, and the next reads are tariff exposure on guidance and the conversion of recent program wins, including a full-size SUV wire-harness award.
Bull Case
The market is pricing Lear as a low-margin, cyclical auto supplier with no growth, and the fundamentals say that view is too dark. The methods that value the business off its earnings, assets, and peer multiples all land above the current price; only the most pessimistic reads sit near it. That is the signal: this is a value and asset-supported name where the market is discounting a structural decline that the recent results do not show. Lear just posted record first-quarter earnings, with revenue up 5% to $5.8 billion and adjusted earnings per share up 24%. A company growing earnings double digits is not the dying cyclical the multiple implies.
The two segments do different jobs, and both are performing. Seating, at $4.40 billion of sales, is the scale business: Lear is one of a handful of global seat-system suppliers, and the company notes it competes with the "seat system suppliers identified above, as well as certain suppliers that specialize in particular components." That consolidation, few credible global players, is what gives a thin-margin business pricing discipline and stability. E-Systems is the growth engine, supplying the electrical architecture of modern vehicles, with a portfolio the company describes as including "zonal controllers, body domain control modules, and smart and passive power distribution modules" plus embedded software. As vehicles add electronics and electrify, the content Lear sells per car rises, which is organic growth independent of how many cars are built.
Capital allocation is where the value gets compounded. Lear has been buying back stock steadily, with the share count down about 3.8% a year, so the record earnings are spread across fewer shares. It secured a meaningful E-Systems award to supply wire harnesses for General Motors full-size SUV programs and won $280 million of new business with Chinese automakers in the quarter, building a record backlog that underwrites future revenue. Net debt sits at a manageable roughly 2.2 times operating income with interest covered more than eight times. A profitable supplier with a record backlog, a growing electronics business, and a steady buyback, trading below what the methods say it is worth, is the value setup the bull is buying.
Bear Case
Lear's capital allocation is the right thing to scrutinize, because it is leaning heavily on buybacks to deliver earnings growth in a business whose margins it cannot easily lift. Adjusted earnings per share rose 24% in the quarter, but a meaningful slice of that came from the falling share count rather than from operating improvement; the underlying seating and E-Systems adjusted margins, at 6.9% and 6.1%, are thin and have limited room to expand in a competitive supply market. Buying back stock when the cash could also de-risk a cyclical balance sheet is a defensible choice, but it means per-share growth depends on continuing to retire shares, which is not the same as the business getting fundamentally better.
The customer and cost structure leave Lear squeezed from both sides. As a tier-one supplier, its revenue rises and falls with automaker production schedules it does not control, and it competes for that business against the other global seat and electronics suppliers it names in its filings. When automakers cut output or push for price concessions, a 6-to-7% margin has little cushion. Tariffs are a live pressure: management maintained full-year guidance despite tariff-driven revenue headwinds, which means the headwinds are real and being absorbed rather than avoided. A thin-margin business absorbing tariff costs is one negotiation away from margin slippage.
The valuation looks cheap, but cheap auto suppliers are cheap for a reason the price already knows. At about 11 times operating income, the methods say the stock should be worth more, but auto supply is a perennial value trap: the multiple stays low because the market correctly anticipates that the next production downturn or the next round of EV-transition investment will compress returns. Net debt near 2.2 times operating income is manageable today, but it is the kind of leverage that turns uncomfortable in a sharp volume decline. The bear case is not that Lear is poorly run; it is that the price reflects a structural skepticism about thin-margin auto supply that no amount of buyback fully cures.
Valuation
The price reads Lear as a structurally challenged auto supplier, and the methods say that read is too harsh. At today's quote the shares trade around 11 times company-wide operating income, low enough that the price sits below what even a 5%-a-year decline in operating profit would justify. That is a bound rather than a precise solve: the market is pricing in erosion, and the question is whether Lear's record backlog and growing electronics content deliver better than that assumption. The company-wide read frames it as a value and asset-supported name, not a growth bet.
The methods cluster on the cheap side. The forward-growth and relative-multiple methods land well above the current price, the asset-and-profitability methods reach above it, and only the most conservative reads sit near the quote. There is no overvaluation gap; the entire spread is the discount the market applies to thin-margin, cyclical auto supply. The catalyst to close it is not multiple re-rating but the backlog converting into revenue and E-Systems content per vehicle continuing to rise. The thin segment margins, around 6 to 7%, are the reason the market hesitates: there is little buffer if automaker volumes or pricing turn.
Solvency is sound and bounds the downside reasonably. Net debt sits at about 2.2 times operating income, with interest covered more than eight times, comfortable for a supplier in a normal production year. Liquid assets near $882 million provide a cushion. The share count is falling about 3.8% a year, real capital return that has driven much of the recent per-share growth. The genuine downside variable is automotive production volume and tariff cost absorption, both of which the methods already discount; the price assumes the harder version of that path, and the record backlog is the asset that argues the discount is overdone.
Catalysts
The first quarter of 2026 was a record print despite a tough backdrop. Revenue rose 5% year over year to $5.8 billion, net income was $172 million, and adjusted earnings per share climbed 24% to $3.87, helped by margin improvement and share repurchases. Seating delivered $4.40 billion of sales at about 6.9% adjusted margin and E-Systems $1.42 billion at about 6.1%.
Management maintained full-year 2026 guidance of $23.21 billion to $24.01 billion in net sales and $550 million to $650 million of free cash flow, holding the line despite tariff-driven revenue headwinds. The backlog was reinforced by new wins, including an E-Systems award to supply wire harnesses for General Motors full-size SUV programs starting in late 2027 and $280 million of new business secured with Chinese automakers across both segments in the quarter.
The near-term watch items are tariff developments, the swing factor management called out against its maintained guidance, and the pace at which the record backlog converts into revenue. The longer-dated catalyst is E-Systems content growth as vehicles electrify, since rising electronics content per car is the organic lever that can lift the blended margin over time.
Peer Cohorts (Per Segment, With Filing Citations)
Seating / E-Systems (reported)
- APTV (APTIV PLC)
- FY2025 10-K: …aptv:AdvancedSafetyandUserExperienceMember 2025-01-01 2025-12-31 0001521332 us-gaap:OperatingSegmentsMember srt:AsiaPacificMember aptv:EngineeredComponentsGroupMember 2025-01-01 2025-12-31 0001521332 us-gaap:OperatingSegmentsMember srt:AsiaPacificMember aptv:ElectricalDistributionSystemsMember 2025-01-01 2025-12-31…
- FY2025 10-K: …2025-12-31 0001521332 us-gaap:MachineryAndEquipmentMember 2025-12-31 0001521332 us-gaap:MachineryAndEquipmentMember 2024-12-31 0001521332 srt:MinimumMember us-gaap:OfficeEquipmentMember 2025-12-31 0001521332 srt:MaximumMember us-gaap:OfficeEquipmentMember 2025-12-31 0001521332 us-gaap:OfficeEquipmentMember 2025-12-31…
- BWA (BORGWARNER INC)
- FY2025 10-K: …bwa:A2023RestructuringPlanMember 2025-01-01 2025-12-31 0000908255 bwa:TurbosThermalTechnologiesMember bwa:A2023RestructuringPlanMember 2025-01-01 2025-12-31 0000908255 bwa:SeveranceAndProfessionalFeesMember bwa:TurbosThermalTechnologiesMember bwa:A2023RestructuringPlanMember 2025-01-01 2025-12-31 0000908255…
- FY2025 10-K: …bwa:DrivetrainMorseSystemsMember 2024-01-01 2024-12-31 0000908255 us-gaap:OperatingSegmentsMember bwa:CustomerMember bwa:PowerDriveSystemsMember 2024-01-01 2024-12-31 0000908255 us-gaap:OperatingSegmentsMember bwa:CustomerMember bwa:BatteryChargingSystemsMember 2024-01-01 2024-12-31 0000908255…
- ALV (AUTOLIV, INC.)
- FY2025 10-K: …and strengthening its position with new automakers to capture the growth opportunities that come with these changes. This includes long-term development agreements with several new automakers in China in recent years, as well as increased investments in capacity and capabilities in India. The order intake from new…
- FY2025 10-K: Goiana Seatbelts and steering wheels Leased Canada Autoliv Canada, Inc. Tilbury Airbag cushions Owned VOA Canada, Inc. Collingwood Seatbelt webbing Owned China Autoliv (Baoding) Vehicle Safety Systems Co., Ltd Baoding Airbags and steering wheels Leased Autoliv (Changchun) Vehicle Safety Systems Co., Ltd. Changchun…
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.
Sources
Lear Q1 2026 earnings release, May 2026 · Lear Q1 2026 earnings call, May 2026