TIMKEN CO (TKR): what the price requires

At today's price, TIMKEN CO (TKR) is priced for +21.7% 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/TKR

Headline

FieldValue
TickerTKR
CompanyTIMKEN CO
Sector / IndustryIndustrials
Current price$138.14/sh
CompositionEngineered Bearings 66% / Industrial Motion 34%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed10.5%
Operating margin today12.8%
Margin compression implied-2.3pp
Implied growth21.7%
Multiple paid19x 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 10.2% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.8pp.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.60σ
cohort percentile (of 225 peers)40
sustained it ~5 years at this level35%
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
Asset2.86x5expensive
Earnings3.59x4expensive
Relative1.26x3expensive
Growth1.42x3expensive

Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$95.781.44xyesFCF base $0.4B, growth 3% (input: historical growth), terminal g 3.4%, WACC 7.7%, 5yr projection
DCF Exit MultipleGrowth$121.921.13xyesExit EV/EBITDA: 12.5x / 14.5x / 16.5x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$104.991.32xyesP/E 22.04x (blended: static sector reference 18x + trailing (TTM) 31x), scenarios: 18.5x / 22.0x / 25.6x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$47.482.91xyesBV/sh $45.69, ROE (TTM) 9.6%, ke 9.3%
Two-Stage Excess ReturnAsset$48.372.86xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$97.271.42xyesRev $4.7B, growth 3% (input: historical growth; tapered), Terminal P/S: 1.7x / 2.1x / 2.4x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$57.402.41xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.62B × (1−26%) / WACC 7.7% → EPV (no growth)
Residual IncomeAsset$48.532.85xyesBV $45.69 + 5yr PV of (ROE (TTM) 9.6% − Kₑ 9.3%) × BV; BV grows 6.2%/yr
Graham NumberAsset$67.262.05xyes√(22.5 × EPS $4.40 × BVPS $45.69) — Graham's conservative floor
EV/EBITDA RelativeRelative$109.921.26xyesEBITDA $0.80B × sector EV/EBITDA 12.0x
FCF YieldEarnings$32.344.27xyesFCF $383.2M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$27.964.94xyesSBC-adj FCF $0.35B (FCF $0.38B − SBC $0.03B) capitalized at Kₑ
Ben Graham FormulaEarnings$3.6937.44xyesEPS $4.40 × (8.5 + 2×-4.5%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$14.639.44xyesBV $45.69 × (ROIC 2.5% / WACC 7.7%)
P/Sales SectorRelative$166.400.83xyesRevenue $4.67B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$47.572.90xyesEPS $4.40 / 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$1.7b
Net debt / NOPAT (after-tax)3.93x
Net debt / operating income (pre-tax)2.91x
Interest coverage5.6x
Share count CAGR (buyback)-1.8%
Burning cashno

Bullet Takeaways

Bull Case

The most surprising number in Timken's story right now is a tariff line that points the wrong way. For most industrial manufacturers, 2026 trade policy is a cost; Timken's management guided to an incremental $0.15 per share tailwind from tariffs versus its prior outlook, driven by a lower tariff rate on India and net-positive changes to Section 232 in April, offset only by a $0.10 buffer for potential cost inflation. A century-old American bearings maker positioned so that trade barriers help it is not the obvious narrative, and it compounds the quarter that came with it: adjusted EPS of $1.67 against a $1.51 consensus, revenue of $1.23 billion against $1.17 billion expected, and sales up 8% year over year with 4.3% organic growth.

Management responded by raising the full year twice over: adjusted EPS guidance moved to $5.75 to $6.25, implying 13% growth at the midpoint versus the prior 8%, and organic revenue growth expectations rose to about 3% at the midpoint on a strengthening order book across most end markets. The demand base underneath is deliberately hard to knock over; the 10-K lists end markets spanning renewable energy, automation, rail, aerospace, agriculture, mining, and marine, and states that "No single customer accounts for more than 5% of total net sales". The bolt-on machine keeps running too: the CGI acquisition folded in during 2024 per the 10-K, and Bijur Delimon, an automated lubrication systems maker serving rail, power generation, and mining, was added more recently.

Capital returns are steady in the way long holders want: the quarterly dividend was raised to $0.36 in May 2026, the thirteenth consecutive annual increase, and the share count has drifted down about 1.8% a year over the past four years. With new CEO Lucian Boldea now in the seat and Oppenheimer lifting its target to $147 in June, the bull case is simply momentum plus mix: a diversified industrial delivering double-digit profit growth, guiding higher, and getting a policy tailwind its competitors would trade for.

Bear Case

Bearings are early-cycle machinery components, and Timken's own filing describes the exposure without decoration: customers in its industries "historically have tended to delay large capital projects, including expensive maintenance and upgrades during economic downturns", so that "our revenues and earnings are impacted by overall levels of industrial production". The question a buyer at $137 has to answer is where in that cycle this price sits. The current quarter's evidence, raised guidance, improving order books, favorable currency, and a tariff tailwind, reads like the good part of the cycle, and the market has capitalized it: the stock trades at roughly 31 times trailing earnings against an 18x sector median, and the price requires operating income growth of about 21.5% a year for five years, a pace only about 35% of comparable fast-growers have sustained.

The requirement-versus-demonstrated gap is the spine. Timken has recently delivered that kind of profit growth, which is why the priced-in read lands within range rather than elevated, but delivering it for five consecutive years through whatever industrial production does is a different bet. If growth mean-reverts to the roughly 3% organic revenue pace management itself guides to, the earnings trajectory falls back on margin gains and buybacks, and the 31x trailing multiple compresses toward the sector's 18x. Earnings-power methods, which capitalize the five-year average of operating income with no growth, put the price at about 3.6 times their central estimate; that is the size of the cushion if the cycle stops cooperating.

Cash conversion and the balance sheet narrow the margin for error further. Trailing free cash flow is about $383 million against a $9.6 billion market value, roughly a 4% trailing free-cash-flow yield, thin for a cyclical, and net debt of about $1.7 billion runs around three times trailing operating income with interest covered about five times. None of that is distress, but it means the capital-return streak and the bolt-on acquisition cadence both depend on earnings staying up. A first-year CEO, a guide that already banks a tariff benefit, and end markets the company itself ties to industrial production leave several ways for a within-range price to become an expensive one.

Valuation

At $137.14 (July 10, 2026), the market pays about 19 times Timken's company-wide operating income, which inverts to roughly 21.5% annual operating income growth sustained for five years at a 10.2% cost of capital. Hold the solve loosely, since each point of cost of capital moves the implied growth by nearly seven points. Two reference points frame it: the near-term pace is within what Timken has recently delivered, and about 35% of comparable fast-growers historically sustained it for the full five years. On balance the priced-in assumption reads as within range, a demanding but plausible continuation bet rather than a stretch. One measurement note: the 19x multiple prices the record-basis trailing operating income of about $679 million, while the leverage figures below read the EDGAR quarterly trailing basis of about $565 million; the two bases differ by roughly 20% and are labeled, not interchangeable.

The method families disagree along a familiar seam for a mid-cycle industrial. Peer multiples come closest to the price, with the central read about 25% below it, blending an 18x sector P/E against Timken's own 31x trailing earnings, and a 12x sector EV/EBITDA. Forward-growth methods land about 40% below the price on their central estimates, though holding today's roughly 14x EV/EBITDA flat for five years narrows that gap to about 13%. The stricter frames are much further away: asset-based approaches sit at about a third of the price (book value of $45.69 per share earning a 9.6% trailing return on equity, barely above the 9.3% the models require), and earnings-power approaches at about 28 cents on the dollar, capitalizing five-year average operating income with no growth credit. The pattern says the price is a relative-value story, defensible against how the sector is currently priced, expensive against what the business has demonstrably banked.

The balance sheet carries moderate leverage rather than stress: about $1.7 billion of net debt at roughly three times trailing operating income (EDGAR basis), interest covered about 5.2 times, no cash burn, and a share count shrinking about 1.8% a year. What has to be true at this price is specific: operating income compounding near 20% for five years, against a company guiding to 3% organic revenue growth and a filing that ties earnings to industrial production. The distance between those two statements is the valuation debate in one line.

Catalysts

The May 6, 2026 first-quarter report was the year's inflection so far: adjusted EPS of $1.67 beat consensus by about 11%, revenue of $1.23 billion beat by about 5%, and management raised full-year adjusted EPS guidance to $5.75 to $6.25, a 13% growth midpoint versus the prior 8%, while lifting organic growth expectations to about 3% on a firming order book across most end markets. The second-quarter print, expected in late July or early August, tests whether that order-book improvement is a trend or a restock.

Trade policy is a live swing factor in both directions. The current guide embeds an incremental $0.15 per share tariff tailwind, mostly from the lower tariff rate on India and the April 6 Section 232 changes, hedged by a $0.10 per share buffer for potential cost inflation through year-end. Any reversal in those rates flips the sign on a meaningful slice of this year's guided growth.

The corporate calendar adds three quieter threads: new CEO Lucian Boldea's first full guidance cycle after the 2025 leadership transition, integration of the Bijur Delimon lubrication-systems acquisition that extends the Industrial Motion portfolio into rail, power generation, and mining, and a capital-return cadence that just delivered a thirteenth straight annual dividend increase to $0.36 per quarter in May 2026. Sell-side sentiment has followed the numbers up, with Oppenheimer raising its target to $147 from $137 in early June.

Peer Cohorts (Per Segment, With Filing Citations)

Engineered Bearings (reported)

Industrial Motion (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

Timken Q1 2026 results, May 6, 2026 · Q1 2026 earnings call · Q1 2026 earnings call, Motley Fool transcript · Q1 2026 results, Investing.com · Timken news · Timken news; Investing.com · Timken Q1 2026 results and earnings call, Investing.com and Motley Fool · Investing.com

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