TENNANT CO (TNC): what the price requires
At today's price, TENNANT CO (TNC) is priced for +9.0% 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/TNC
Headline
| Field | Value |
|---|---|
| Ticker | TNC |
| Company | TENNANT CO |
| Sector / Industry | Industrials / Industrial Machinery |
| Current price | $85.01/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.8% |
| Operating margin today | 6.4% |
| Margin compression implied | -1.6pp |
| Implied growth | 9.0% |
| Multiple paid | 23x 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 7.7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.9pp.
Reconcile: at the x-ray's 9.3% required return this reads ~20.9%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.04σ |
| cohort percentile (of 225 peers) | 54 |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 5.22x | 4 | expensive |
| Earnings | 4.68x | 3 | expensive |
| Relative | 1.69x | 3 | expensive |
| Growth | 1.77x | 3 | expensive |
Families that call it expensive: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=13)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $7.28 | 11.68x | yes | FCF base $0.0B, growth -4% (input: historical growth), terminal g 0.5%, WACC 9.2%, 5yr projection |
| DCF Exit Multiple | Growth | $62.93 | 1.35x | yes | Exit EV/EBITDA: 21.8x / 23.8x / 25.8x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $50.33 | 1.69x | yes | P/E 27.29x (blended: static sector reference 18x + trailing (TTM) 49x), scenarios: 23.1x / 27.3x / 31.5x (bear / base = reference held flat / bull), EV/EBITDA 15.54x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $18.76 | 4.53x | yes | BV/sh $29.83, ROE (TTM) 5.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $14.41 | 5.90x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $47.92 | 1.77x | yes | Rev $1.2B, growth -4% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.2x / 1.4x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $45.15 | 1.88x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.10B × (1−21%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $13.86 | 6.13x | yes | BV $29.83 + 5yr PV of (ROE (TTM) 5.8% − Kₑ 9.3%) × BV; BV grows 3.8%/yr |
| Graham Number | Asset | $33.58 | 2.53x | yes | √(22.5 × EPS $1.68 × BVPS $29.83) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $41.89 | 2.03x | yes | EBITDA $0.07B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $7.98 | 10.65x | yes | FCF $16.3M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $2.69 | 31.60x | yes | SBC-adj FCF $0.01B (FCF $0.02B − SBC $0.01B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $1.41 | 60.29x | yes | EPS $1.68 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $2.22 | 38.29x | yes | BV $29.83 × (ROIC 0.7% / WACC 9.2%) (excluded from median) |
| P/Sales Sector | Relative | $170.10 | 0.50x | yes | Revenue $1.21B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $18.16 | 4.68x | yes | EPS $1.68 / 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 | $360.2m |
| Net debt / NOPAT (after-tax) | 5.89x |
| Net debt / operating income (pre-tax) | 4.65x |
| Interest coverage | 7.5x |
| Share count CAGR (buyback) | -1.4% |
| Burning cash | no |
Bullet Takeaways
- Tennant's FY2025 10-K states the company "believes it is a leading global manufacturer of floor maintenance and cleaning equipment", and its robotics line is the growth story: autonomous scrubber sales grew 85% year over year to $27 million in Q1 2026, against a target of $250 million by 2028.
- The risk is that the price already assumes the recovery: at 49x trailing earnings depressed by a disruptive ERP rollout that cut first-quarter net sales by $23 million, no family of valuation method reaches today's level.
- Watch the second-quarter report, where management projects adjusted EPS of $1.34, for evidence the ERP disruption is actually behind the P&L and the 10% order growth is converting to shipped revenue.
Bull Case
The trajectory matters more than the trailing year here, because the trailing year was self-inflicted. Tennant's recent quarters were disfigured by an ERP system cutover that reduced first-quarter 2026 net sales by $23 million and gross margin by $17 million, which is why trailing net margin sits at a thin 2.6%. Underneath the accounting noise, the demand line points the other way: orders totaled $327 million in the first quarter, up 10% year over year, and management reaffirmed full-year 2026 adjusted EPS guidance of $4.70 to $5.30 on the strength of that order momentum and ERP recovery progress. The company's own 10-K notes the demand inflection arrived late in FY2025 too: "In China, after a period marked by uneven economic recovery and pricing pressure, organic growth returned late in the year" (accession 0000097134-26-000008), with EMEA and APAC following.
The structural asset is distribution. The filing describes "the industry's largest direct sales and service organization" selling "directly in 21 countries and through distributors in more than 100 countries", a field-service network that keeps machines, aftermarket parts, and consumables flowing through one channel. That channel is now carrying a genuinely new product cycle: the autonomous ROVR line grew 85% year over year to $27 million of first-quarter sales, management has committed to ten new autonomous products with Brain Corp exclusivity extended to 2029, and the portfolio has expanded in twelve months from the X4 and X6 ROVR to the X2 ROVR SCRUB for small, high-traffic spaces. A robotics business at $250 million by 2028, management's stated target, would be roughly a fifth of today's total revenue at software-assisted economics.
The balance sheet lets management act like the disruption is temporary, which is itself information. Over the trailing year the company bought back $128.3M of stock, several times its ERP-depressed net income, while growing the dividend to an annualized $1.24 per share; the share count is falling and the Altman read sits in the safe zone. Buying back stock aggressively through a transition year is what a board does when it believes the earnings power is the guided $4.70 to $5.30, not the trailing $1.68.
Bear Case
The price is a stack of assumptions, and it is worth naming them in order of fragility. Today's level embeds roughly 9.5% annual operating-profit growth for five years and pays about 23 times company-wide operating income for the privilege. Assumption one: the ERP recovery completes on schedule and the $23 million of first-quarter sales it displaced comes back rather than leaks to competitors. Assumption two: the order book converts, because first-quarter EPS of $0.58 missed the $0.94 forecast badly even with orders up 10%. Assumption three, the load-bearing one: the robotics line scales from a $27 million quarter to a $250 million annual business by 2028. That last bet rides on a partner, since the ROVR portfolio runs on Brain Corp's operating system under an exclusivity arrangement that itself now runs only to 2029. A hardware company whose growth narrative depends on a licensed software brain has a renegotiation in its future.
The company documents the operational fragility itself. The 10-K's systems risk factor concedes that "limitations in resources and expertise may hinder our ability to upgrade these systems efficiently, potentially resulting in significant expenses, operational inefficiencies" (accession 0000097134-26-000008), which is no longer hypothetical; it is a description of the current income statement. Gross margin declined in the first quarter on volume softness, ERP issues, and pricing pressure simultaneously, and pricing pressure is the one of the three that does not fix itself when the software stabilizes.
Meanwhile the trailing financials the price stands on are thin. Trailing free cash flow of $16.3M against a $1.52B market capitalization is a 1.1% free cash flow yield, the dividend consumed 71.4% of trailing net income, and the $128.3M of buybacks ran at more than four times net income, funded from the balance sheet rather than the year's earnings. Two measures of trailing operating income are in play, roughly $91 million on the fuller-year record basis and about $54 million on the most recent quarterly run-rate, and the gap between them is the ERP hole; the bear case is simply that some of that hole is permanent. If the recovery-and-robotics narrative slips by even a year, a 49x trailing multiple has a long way down to the 18x its sector pays.
Valuation
At $85.61 (July 11, 2026), the market is paying about 23 times company-wide operating income, which under the framework's assumptions embeds roughly 9.5% annual operating-profit growth for five years. The rate is within what Tennant has recently delivered in better years; the demand is that it persist. Notably, the price asks nothing of margins: the long-run operating margin it requires, about 4.1%, is roughly what the ERP-depressed business earns today at 4.4%. The whole bet is volume recovery and growth duration.
Every family of valuation method sits below the price. Peer multiples and the forward-growth methods come closest, reading the price at roughly 1.7x and 1.8x their central estimates, while the asset-value and earnings-power frames sit much further away at 5.6x and 4.7x, capitalizing as they do a trailing year in which net margin fell to 2.6% and free cash flow to $16.3M. The trailing P/E of 49.3x against an 18x sector median carries the same message with a different label. The spread between the families is unusually wide because the denominator is unusually depressed: a business that just absorbed a $23 million sales hit and a $17 million gross-margin hit from its own systems cutover produces trailing numbers that the static methods take at face value. Two trailing operating-income bases are in play, roughly $91 million on the inversion record basis versus about $54 million on the EDGAR quarterly TTM basis; the price only makes sense against the former plus recovery, never against the latter.
The balance sheet is the stabilizer while that argument resolves. Leverage is moderate and well covered, the current ratio is 2.12, the Altman read is safe-zone, and capital return totaled $150.1M over the trailing year between $128.3M of buybacks and $21.8M of dividends on a $1.52B company. The decisive number to track is gross margin in the next two prints: the filing's own framing of the company as "a leading global manufacturer of floor maintenance and cleaning equipment" selling through "the industry's largest direct sales and service organization" (FY2025 10-K, accession 0000097134-26-000008) is only worth today's premium if that franchise's normal profitability, not the trailing year's, is the true baseline.
Catalysts
The next quarterly report is the main event, and the bar is explicit: management projects second-quarter adjusted EPS of $1.34 after first-quarter adjusted EPS of $0.58 missed forecasts on ERP disruption, and it reaffirmed full-year 2026 adjusted EPS guidance of $4.70 to $5.30. The print will show whether the $23 million of net sales the ERP cutover displaced in the first quarter is returning as shipped revenue, and whether the 10% order growth to $327 million holds as the comparison base normalizes.
The robotics cadence is the second live storyline. Tennant introduced the X2 ROVR SCRUB on May 11, 2026, extending the autonomous line into small, high-traffic spaces alongside the X4 and the X6 ROVR launched in 2025, part of a stated commitment to ten new autonomous products in two years on the way to $250 million of AMR revenue by 2028. Deployment proof points are starting to arrive at scale internationally, including a national retail rollout of X6 units in Australia beginning late August. Quarterly AMR revenue against the $27 million first-quarter mark, and any disclosure about the Brain Corp relationship now extended to 2029, are the growth-story trackers.
Demand geography rounds out the watch list: the FY2025 10-K noted organic growth returning late in the year in China and improving in EMEA and APAC (accession 0000097134-26-000008), so regional organic growth rates in coming quarters will indicate whether that inflection was durable or a restock. With buybacks running at $128.3M over the trailing year, continued repurchase pace is also a signal of management's internal confidence in the guided recovery.
Peer Cohorts (Per Segment, With Filing Citations)
Tennant (consolidated) (reported)
- MIDD (THE MIDDLEBY CORPORATION)
- (no filing in the citation store)
- NDSN (NORDSON CORPORATION)
- (no filing in the citation store)
- GGG (GRACO INC.)
- (no filing in the citation store)
- IEX (IDEX CORP)
- (no filing in the citation store)
- DCI (DONALDSON COMPANY, INC.)
- (no filing in the citation store)
- FELE (FRANKLIN ELECTRIC CO., INC.)
- (no filing in the citation store)
- TTC (THE TORO COMPANY)
- (no filing in the citation store)
- GTLS (CHART INDUSTRIES, 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.
Sources
Q1 2026 earnings call, Seeking Alpha · Investing.com earnings coverage, 2026 · Q1 2026 earnings call, April 2026 · Seeking Alpha, Q1 2026 coverage · Business Wire, May 11, 2026; Q1 2026 earnings call · Investing.com, Q1 2026 earnings coverage · Q1 2026 earnings call · StockStory Q1 deep dive, 2026 · Investing.com and Seeking Alpha, Q1 2026 earnings coverage · Business Wire, May 11, 2026 · INCLEAN magazine, 2026