REGAL REXNORD CORP (RRX): what the price requires

At today's price, REGAL REXNORD CORP (RRX) is priced for today's economics sustained for ~8.6 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/RRX

Headline

FieldValue
TickerRRX
CompanyREGAL REXNORD CORP
Current price$210.27/sh
CompositionNorth America 70% / Asia 7% / Europe 17% / Rest-of-World 6%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed5.9%
Operating margin today11.4%
Margin compression implied-5.5pp
Must persist for8.6y
Multiple paid28x operating income

The operating-margin requirement is derived from the framework's value band at year 7, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 11% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.

Reconcile: at the x-ray's 9.3% required return this reads ~5.5 years; the models below use their own rates.

How unusual the bet is: elevated

ReferenceValue
vs own history+0.36σ
cohort percentile (of 225 peers)63
sustained it ~8.6 years at this level18%
implied end-window share0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

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
Asset7.01x5expensive
Earnings3.64x5expensive
Relative1.76x5expensive
Growth1.42x3expensive

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 7.2%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$147.821.42xyesFCF base $0.8B, growth 2% (input: historical growth), terminal g 1.6%, WACC 7.2%, 5yr projection
DCF Exit MultipleGrowth$194.091.08xyesExit EV/EBITDA: 20.4x / 22.4x / 24.4x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$119.631.76xyesP/E 27.31x (blended: static sector reference 18x + trailing (TTM) 49x), scenarios: 23.0x / 27.3x / 31.6x (bear / base = reference held flat / bull), EV/EBITDA 15.13x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$46.374.53xyesBV/sh $101.88, ROE (TTM) 4.2%, ke 9.3%
Two-Stage Excess ReturnAsset$30.017.01xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$142.891.47xyesRev $6.0B, growth 2% (input: historical growth; tapered), Terminal P/S: 2.0x / 2.3x / 2.7x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$111.861.88xyesEPS $4.30, growth 26% (input: historical EPS growth), PEG=1.88 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$39.665.30xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.61B × (1−16%) / WACC 7.2% → EPV (no growth)
Residual IncomeAsset$25.088.38xyesBV $101.88 + 5yr PV of (ROE (TTM) 4.2% − Kₑ 9.3%) × BV; BV grows 2.7%/yr
Graham NumberAsset$99.282.12xyes√(22.5 × EPS $4.30 × BVPS $101.88) — Graham's conservative floor
EV/EBITDA RelativeRelative$81.512.58xyesEBITDA $0.83B × sector EV/EBITDA 12.0x
FCF YieldEarnings$63.523.31xyesFCF $805.1M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$57.723.64xyesSBC-adj FCF $0.77B (FCF $0.81B − SBC $0.04B) capitalized at Kₑ
Ben Graham FormulaEarnings$138.751.52xyesEPS $4.30 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$16.0513.10xyesBV $101.88 × (ROIC 1.1% / WACC 7.2%)
P/Sales SectorRelative$224.380.94xyesRevenue $6.00B × sector P/S 2.5x
PEG Fair ValueRelative$161.251.30xyesEPS $4.30 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$46.494.52xyesEPS $4.30 / 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$4.4b
Net debt / NOPAT (after-tax)7.86x
Net debt / operating income (pre-tax)6.60x
Interest coverage2.0x
Share count CAGR (buyback)-0.4%
Burning cashno

Bullet Takeaways

Bull Case

Valuing Regal Rexnord requires reading it as a company mid-integration rather than at steady state, because its reported operating margin is artificially depressed. The business designs and makes the components that move machines: the filing describes segments serving "general industrial, metals and mining, energy, discrete automation and commercial HVAC" and a motors segment producing "fractional to approximately 5 horsepower AC and DC motors, electronic variable speed controls, electronic drives, fans and blowers". These are entrenched, specified-in products, the kind an equipment maker designs around and does not casually re-source. The bull case is that once acquisition amortization rolls off and the integration completes, the true earnings power is well above what the GAAP line currently shows.

The operating signals point that way. Q1 2026 net income rose to $64.3 million from $57.3 million and diluted EPS climbed to $0.96 from $0.86, with gross margin holding at a healthy 37.2%. Management raised full-year sales guidance and pointed to enterprise orders and backlog growing across most segments, with the automation and power-transmission businesses called out for momentum. A 37% gross margin paired with growing backlog is the raw material from which operating margin expands as volume leverages the fixed base.

Deleveraging is the second leg. Net debt to adjusted EBITDA was 3.31x in Q1 2026, and the company refinanced $1.1 billion of 2026 notes during the quarter, pushing out the maturity wall. As debt comes down and amortization fades, more of the operating cash flow accrues to equity. Management reaffirmed 2026 adjusted EPS guidance of $10.20 to $11.00 and confirmed a CEO transition that signals strategic continuity. The bull thesis is mechanical: backlog plus margin recovery plus deleveraging, compounding into earnings that the depressed trailing figures understate.

Bear Case

The advantage Regal Rexnord is supposed to have, durable component franchises, is showing signs of erosion at exactly the segment that was meant to lead. Management called out adjusted EBITDA margin pressure in the automation business from rare-earth magnet supply constraints and tariff cost timing, with recurring margin compression flagged in Q1. A motion-control supplier dependent on rare-earth magnets it does not control is exposed to an input the bull thesis quietly assumes away, and the shift toward original-equipment-manufacturer sales the company described carries lower margins than the aftermarket business it is partly replacing.

The leverage turns that operational softness into a real risk. Net debt is roughly $4.4 billion, and on trailing operating income, which is held down by acquisition amortization, interest is covered only about 2 times. Even on the company's preferred adjusted-EBITDA basis the leverage is 3.31x, which is manageable but leaves little room if the cyclical end markets, general industrial, metals and mining, energy, soften together. The 2026-notes refinancing pushed out the maturity, but it did so partly with revolver borrowings and a term facility, so the debt was rolled rather than retired.

Then there is the valuation itself, which is unusual for an industrial: no standard method reaches the price. The asset-value, earnings-power, peer-multiple, and even forward-growth lenses all land below the quote, several of them far below, because they price the earnings the company actually reports rather than the earnings the bull case projects after integration. That makes the stock a bet on a forecast, not on demonstrated results. If amortization does not roll off into clean margin expansion, or if the magnet and tariff headwinds persist, there is no value-method floor anywhere near $226 (June 28, 2026) to catch the fall. The filing also flags execution risk from divesting its industrial motors and generators business, including the difficulty of eliminating the corporate overhead that segment carried. A levered company priced for a recovery it has not yet delivered has the thinnest margin for error in this peer group.

Valuation

The price makes a demanding bet, and the methods are unanimous that it is demanding. At about 29 times trailing operating income, no valuation family reaches the price: it is rich on assets, on earnings power, on peer multiples, and even on forward growth. That is rare for an industrial, and the explanation is partly mechanical. Trailing GAAP operating income is depressed by amortization from the acquisitions that built the company, so the 29 times multiple overstates how expensive the steady-state business is. But even crediting that, the price requires operating profit to compound near its self-funding ceiling for roughly nine years, an outcome only about one in six comparable companies has sustained that long.

The pattern is the cleanest possible statement of a forecast-dependent stock. Because every static method lands below the price, the entire valuation rests on the integration thesis: amortization rolling off, margin recovering from today's roughly 11% toward the company's targets, and deleveraging shifting cash flow to equity. The forward-growth methods come closest but still sit below the price, which means even a generous growth assumption does not fully justify the quote on reported numbers.

Solvency is where the bet is most exposed. Net debt of roughly $4.4 billion is about 6.6 times trailing operating income, and on that basis interest is covered only about 2 times; on the company's adjusted-EBITDA basis the leverage is a more comfortable 3.31x. The two figures disagree precisely because of the amortization drag, which is the same thing that makes the multiple look extreme. The decisive question for the valuation is whether reported operating earnings converge upward toward the adjusted figures as integration completes. If they do, the price looks less stretched than 29 times suggests; if they do not, there is no method holding it up.

Catalysts

Q1 2026 showed gradual progress on the recovery narrative. Net income rose to $64.3 million from $57.3 million a year earlier and diluted EPS increased to $0.96 from $0.86, with gross margin holding at 37.2% even as operating margin slipped to about 10.3%. Management raised full-year sales guidance and pointed to enterprise orders and backlog growing across most segments, with the automation and power-transmission units highlighted for momentum, while reaffirming 2026 adjusted EPS guidance of $10.20 to $11.00.

The balance sheet moves are the other catalyst. The company refinanced $1.1 billion of 2026 notes during the quarter through an $850 million term facility and revolver borrowings, and reported net debt to adjusted EBITDA of 3.31x. It also confirmed a CEO transition to Aamir Paul, which management framed as continuity of strategy rather than a change in direction.

The live headwinds to watch are the rare-earth magnet supply constraints and tariff cost timing pressuring automation margins, which management flagged as recurring. The bull and bear both hinge on the same forward variables: whether margins recover as integration completes and headwinds ease, and whether deleveraging continues. The next earnings print and any progress on the magnet and tariff issues are the events that move the story.

Peer Cohorts (Per Segment, With Filing Citations)

Automation & Motion Control (AMC) (reported)

Industrial Powertrain Solutions (IPS) (reported)

Power Efficiency Solutions (PES) (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

Regal Rexnord Q1 2026 earnings release, May 2026

View the full interactive RRX report on boothcheck