Pentair plc (PNR): what the price requires
At today's price, Pentair plc (PNR) is priced for +17.1% 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/PNR
Headline
| Field | Value |
|---|---|
| Ticker | PNR |
| Company | Pentair plc |
| Current price | $76.32/sh |
| Composition | Residential 57% / Commercial 24% / Industrial 19% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | segment |
| Implied growth | 17.1% |
Solve inputs: computed at a 9.5% cost of capital with 5% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.7pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| cohort percentile (of 225 peers) | 52 |
| sustained it ~5 years at this level | 41% |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.65x | 5 | expensive |
| Earnings | 2.15x | 5 | expensive |
| Relative | 1.38x | 5 | expensive |
| Growth | 1.12x | 3 | expensive |
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 8.5%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $68.18 | 1.12x | yes | FCF base $0.7B, growth 3% (input: historical growth), terminal g 3.1%, WACC 8.5%, 5yr projection |
| DCF Exit Multiple | Growth | $71.97 | 1.06x | yes | Exit EV/EBITDA: 13.7x / 15.7x / 17.7x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $65.78 | 1.16x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.2x / 18.0x / 20.8x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $44.33 | 1.72x | yes | BV/sh $23.27, ROE (TTM) 17.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $60.40 | 1.26x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $54.81 | 1.39x | yes | Rev $4.2B, growth 3% (input: historical growth; tapered), Terminal P/S: 2.5x / 3.0x / 3.4x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $48.96 | 1.56x | yes | EPS $4.08, growth 7% (input: historical EPS growth), PEG=2.54 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $35.43 | 2.15x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.79B × (1−15%) / WACC 8.5% → EPV (no growth) |
| Residual Income | Asset | $60.31 | 1.27x | yes | BV $23.27 + 5yr PV of (ROE (TTM) 17.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $46.22 | 1.65x | yes | √(22.5 × EPS $4.08 × BVPS $23.27) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $55.42 | 1.38x | yes | EBITDA $0.92B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $34.97 | 2.18x | yes | FCF $715.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $32.32 | 2.36x | yes | SBC-adj FCF $0.68B (FCF $0.72B − SBC $0.04B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $79.22 | 0.96x | yes | EPS $4.08 × (8.5 + 2×7.3%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $8.35 | 9.14x | yes | BV $23.27 × (ROIC 3.1% / WACC 8.5%) |
| P/Sales Sector | Relative | $64.18 | 1.19x | yes | Revenue $4.20B × sector P/S 2.5x |
| PEG Fair Value | Relative | $44.89 | 1.70x | yes | EPS $4.08 × (PEG 1.5 × growth 7.3% (input: historical EPS growth)) → PE 11.0x |
| Earnings Yield | Earnings | $44.11 | 1.73x | yes | EPS $4.08 / 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) | 2.56x |
| Net debt / operating income (pre-tax) | 2.18x |
| Share count CAGR (buyback) | -0.4% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- The capital-allocation discipline is the through-line: Pentair has expanded its return on sales for 16 consecutive quarters (to 25% in Q1 2026), authorized a new $1.0 billion buyback, raised its dividend 8%, and commits to maintaining an investment-grade rating while paying down debt. That margin-and-return focus is what supports the valuation.
- At about $74 the market pays a premium that only the growth-DCF frame reaches; the asset, earnings-power, and peer-multiple frames all read the stock as richly valued. The price implies the Water Solutions segment growing operating profit roughly 16% a year, a durability premium on a water franchise.
- The near-term tension is the Pool segment, where a channel destocking is set to weigh on the second and third quarters and the full-year outlook assumes limited US residential recovery, so the growth the price assumes leans on margin expansion and the non-residential mix rather than a housing rebound.
Bull Case
Lead with how Pentair deploys capital, because that discipline is the engine of the thesis. The company's 10-K states its objective plainly: deliver profitable revenue growth and productivity, maintain an investment-grade rating, reduce long-term debt, and return cash to shareholders. It has executed on all of it. Return on sales expanded to 25% in Q1 2026, the sixteenth consecutive quarter of margin expansion, driven by its Transformation Program and the 80/20 operating principles it implemented in 2025, with about $70 million of net transformation savings targeted for 2026. On the capital-return side, Pentair raised its dividend 8%, authorized a new $1.0 billion repurchase program, and bought back $200 million of stock in the quarter. A water company steadily lifting margins and buying back stock at a measured pace is compounding per-share value through allocation, not just end-market growth.
The franchise underneath is a high-quality water business with a wide reach. Pentair serves residential, commercial, and industrial water customers across pool, flow, and water-treatment products, with residential the largest piece. Its Pool segment, part of a North American near-triopoly with Hayward and Fluidra, leads on automation (IntelliCenter), energy efficiency, and warranty terms, which lets it command a premium price. The business earns a strong return on equity (about 17.6%) and generates roughly $716 million of free cash flow, so the margin expansion is translating into real cash. Q1 2026 delivered record first-quarter sales above $1 billion, adjusted operating income up 7% to $259 million, and adjusted EPS up about 10% to $1.22, and management raised full-year adjusted EPS guidance to a midpoint of about $5.35.
The valuation premium is what the engine flags as a durability premium, and it fits the business. Only the growth-DCF reaches the price, while the asset, earnings-power, and peer-multiple frames sit below it, which the engine characterizes as a bet on durable compounding the static methods cannot price. For a water franchise with structural demand tailwinds (water scarcity, efficiency regulation, replacement cycles), 16 straight quarters of margin gains, and disciplined capital return, paying a moat premium is defensible. The price implies the Water Solutions segment compounding operating profit around 16% a year, which the engine notes is within the plausible range, so the durability assumption is a reach but not an outlier, and the margin program plus the buyback give management two levers to grow EPS even if end markets stay soft.
Bear Case
The moat-erosion case is the right lead, because Pentair's premium rests on a Pool franchise facing both a soft cycle and capable competition. The Pool segment is the highest-margin, most prized part of the business, but it sits in a near-triopoly with Hayward and Fluidra, both well-funded rivals competing on the same automation, efficiency, and warranty features Pentair leads on today. Competitive parity in pool equipment is achievable, and the premium Pentair charges (a 10% to 20% upfront cost premium for its automation and warranties) is only sustainable while its products stay differentiated. Right now the more pressing erosion is cyclical: Q1 2026 Pool core revenue grew just 0.5%, below estimates, management flagged a looming destocking in the Pool segment for the second and third quarters as channel partners adjust to flattish sell-through, and the full-year outlook explicitly assumes limited to no US residential recovery. A durability premium on a segment guided to flat residential demand and near-term destocking is the central tension.
The valuation gives the cyclicality little room. The price embeds the Water Solutions segment compounding operating profit around 16% a year, which the engine flags as in the upper half of the peer range, and only the growth-DCF reaches the price. The other frames sit well below: earnings-power value capitalizing normalized operating income lands near $35, the FCF-yield model near $35, and the Graham number near $46, all far under the roughly $74 (June 28, 2026) quote. The ROIC-justified book value is in the single digits because reported ROIC sits below the cost of capital. When three of four valuation families say the stock is rich and only the most optimistic forward-growth frame reaches it, the price is leaning entirely on the durability assumption, and a soft residential cycle plus a destocking quarter make that assumption harder to defend in the near term.
The skeptics have moved, which is itself a signal. TD Cowen downgraded Pentair to Sell with a $75 price target and Bank of America moved to Underperform at $88, citing the pool and residential headwinds, so part of the analyst community now sees the premium as unjustified against the near-term demand picture. The balance sheet carries about $1.88 billion of net debt with only modest liquidity, so the capital-return program competes with the company's own commitment to reduce long-term debt and maintain its investment-grade rating, limiting how aggressively it can buy back stock if cash flow softens. The bear read is that Pentair is a good business being asked to compound at a premium rate precisely when its best segment is cyclically weak and competitively contested, and if the margin program eventually plateaus or the residential recovery keeps slipping, the conservative frames that sit far below the price become the more honest anchor.
Valuation
Pentair is priced as a durable compounder, with the premium concentrated in one segment. The price decomposes onto the Water Solutions segment, which carries the priced-in premium: at about $74 the market implies that segment growing operating profit roughly 16.4% a year over a five-year stage, solved at a 9.6% cost of capital with 5% terminal growth. The engine notes that implied pace sits in the upper half of the peer multiple range and that only about 42% of comparable fast-growers sustained it for five years, but it still labels the assumption within range with high confidence in the read. The bet is on the water franchise compounding faster than the static frames credit.
The method cross-section is the clearest evidence of a moat premium. Only the growth family reaches the price: the perpetual-growth DCF lands near $68, the exit-multiple DCF near $71, both close to the quote. Every other family sits below it. The earnings family is the lowest, earnings-power value near $35 and FCF-yield near $35, because the price is well above what current normalized earnings capitalize to. The asset family lands in the $44 to $60 range (residual income and two-stage excess return on a $23.27 book value with a 17.6% ROE), and the relative family is mixed, with the P/E and P/S methods near $64 to $66 and the EV/EBITDA method lower. The engine's characterization is exact: asset, earnings-power, and peer-multiple models all say richly valued, and only the growth-DCF reaches the price.
The honest synthesis is that Pentair is fairly valued only if you credit its water franchise as a durable compounder and its 16-quarter margin-expansion streak as continuing, and rich if you anchor on current earnings held flat. The reconciliation between the growth frame that reaches the price and the earnings frames that sit far below is the durability assumption: the price credits sustained mid-teens segment growth and ongoing margin gains, while the conservative frames credit neither. The valuation rewards conviction in the water-demand tailwind and the transformation program, and it is exposed to the near-term pool destocking, the soft residential cycle, and competition, which is why part of the analyst community has turned cautious at the current level.
Catalysts
The catalysts run through the quarterly margin cadence, the pool cycle, and capital allocation. Pentair reported Q1 2026 on April 28, 2026, with record first-quarter sales above $1 billion (up 3%), adjusted operating income up 7% to $259 million, return on sales of 25% (the sixteenth straight quarter of margin expansion), and adjusted EPS up about 10% to $1.22, and it raised full-year adjusted EPS guidance to a midpoint near $5.35. The continuation of the margin-expansion streak, driven by the Transformation Program and 80/20 initiatives targeting about $70 million of 2026 savings, is the clearest recurring catalyst, since margin gains can grow EPS even when revenue is soft.
The near-term swing factor is the Pool segment. Management flagged a destocking in the second and third quarters as channel partners adjust to flattish sell-through, and the full-year outlook assumes limited to no US residential recovery, so any sign of residential demand or channel inventories normalizing would be a positive catalyst, while a deeper destocking would pressure the premium. The 2026 organizational restructuring, consolidating residential flow and water-solutions businesses under unified leadership, is a structural lever to watch for synergy realization. On capital allocation, the new $1.0 billion buyback (with $200 million executed in Q1 and more signaled but not in guidance) and the 8% dividend increase support per-share value, balanced against the company's commitment to reduce debt and hold its investment-grade rating. Sentiment has split: the consensus leans Buy with targets clustered near $117 to $120, but TD Cowen moved to Sell at $75 and Bank of America to Underperform at $88 on the pool and residential concerns. The clearest upside triggers are continued margin expansion, a residential recovery, and buyback execution; the clearest risk triggers are a deeper pool destocking, prolonged residential weakness, and competitive pressure from Hayward and Fluidra.
Peer Cohorts (Per Segment, With Filing Citations)
Flow (reported)
- XYL (Xylem Inc.)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- FELE (FRANKLIN ELECTRIC CO., INC.)
- (no filing in the citation store)
- FLS (FLOWSERVE CORP)
- (no filing in the citation store)
- GGG (GRACO INC.)
- (no filing in the citation store)
- DCI (DONALDSON COMPANY, INC.)
- (no filing in the citation store)
- MWA (MUELLER WATER PRODUCTS, INC.)
- (no filing in the citation store)
- PH (PARKER-HANNIFIN CORPORATION)
- (no filing in the citation store)
Water Solutions (reported)
- ETN (EATON CORPORATION plc)
- (no filing in the citation store)
- HUBB (HUBBELL INC)
- (no filing in the citation store)
- AYI (ACUITY INC.)
- (no filing in the citation store)
- NVT (nVent Electric plc)
- (no filing in the citation store)
- GNRC (GENERAC HOLDINGS INC.)
- (no filing in the citation store)
- ATKR (Atkore Inc.)
- (no filing in the citation store)
Pool (reported)
- XYL (Xylem Inc.)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- FLS (FLOWSERVE CORP)
- (no filing in the citation store)
- HAYW (Hayward Holdings, Inc.)
- (no filing in the citation store)
- MWA (MUELLER WATER PRODUCTS, INC.)
- (no filing in the citation store)
- GGG (GRACO INC.)
- (no filing in the citation store)
- NDSN (NORDSON CORPORATION)
- (no filing in the citation store)
- FELE (FRANKLIN ELECTRIC CO., 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.