ZURN ELKAY WATER SOLUTIONS CORPORATION (ZWS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $48.05, ZURN ELKAY WATER SOLUTIONS CORPORATION (ZWS) is priced for today's economics sustained for ~7.3 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/ZWS

Headline

What The Price Assumes (Inversion)

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

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.

Solve inputs: computed at a 10.3% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: within-range (limited comparison data)

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.

Families that justify the price: Growth 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 8.7%); the inversion above states its own rate.

Per-Model Detail (n=18)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

Zurn Elkay is a mature, profitable maker of water-management products for buildings, not a young grower, and that matters for how to read the price. At about $50 the stock trades near 29 times company-wide operating income, a multiple that prices in years of continued compounding rather than current cash flow.

The execution backs the optimism so far. First-quarter 2026 sales rose 11 percent to $433 million, adjusted EBITDA margin expanded 160 basis points to 26.8 percent, and diluted EPS jumped 46 percent, with the company raising its outlook.

The catch is that nearly every valuation lens except the growth-DCF says the stock is richly valued. The price embeds operating growth holding at a high rate for close to eight years, a durability bet that only about a fifth of comparable companies have historically delivered.

Bull Case

Frame this as a mature compounder, because that is the right lens for the numbers. Zurn Elkay is not a speculative growth story or a deep-value cyclical; it is an established, cash-generative manufacturer of water safety, control, and drinking-water products for the built environment, and at this stage the question is the quality and durability of compounding, not survival or turnaround. On that test the first quarter of 2026 was excellent: net sales rose 11 percent to $433 million with core growth across nearly all categories, adjusted EBITDA rose 18 percent to $116 million as margin expanded 160 basis points to 26.8 percent, operating profit rose about 30 percent, and diluted EPS jumped 46 percent to $0.35. The company beat estimates and raised its outlook, guiding the next quarter to 8 to 9 percent core sales growth and EBITDA margin of 27 to 27.5 percent. That is a business getting both bigger and more profitable at the same time.

The durability the price assumes is rooted in the end market. Demand for the products is primarily driven by new institutional and commercial building construction and by the retrofit of existing structures to make them more water and energy efficient (FY2025 10-K, accession 0001628280-26-006372). Retrofit and code-driven replacement give the business a recurring, less cyclical layer underneath new construction, and the filing notes the industry's specification-driven end market, where products written into building specifications are difficult for a contractor to swap out (same filing). That specification lock-in is the moat: it is why Zurn Elkay can expand margin while growing, and why the company expects to grow faster than the broader waterworks and commercial-construction markets.

Management is compounding value per share on top of the operating gains. The company generated $43 million of free cash flow in the quarter and repurchased $50 million of stock at roughly $47 per share, retiring shares below the current price. The growth-DCF models, the only frame designed to value durable compounding, land at or above the price, with the discounted-cash-flow reads in the low $60s. The bull case is that the static valuation frames structurally cannot price a moat, and that Zurn Elkay's specification-driven, margin-expanding water franchise is exactly the kind of business that earns a premium the simple multiples will always call expensive.

Bear Case

State the uncomfortable truth plainly: at this price the multiples are paying for compounding that has not happened yet. Almost every valuation lens except the most growth-optimistic says Zurn Elkay is richly valued. The asset-based, earnings-power, and peer-multiple models all land well below the $50 price (June 28, 2026), several of them in the teens to low $30s, and only the growth-DCF reaches today's quote. The price embeds operating growth held near its self-funding ceiling for about eight years, and only roughly a fifth of comparable fast-growers have sustained that pace that long. The model labels the priced-in assumption elevated, above what fundamentals comfortably support, which is a polite way of saying the stock is a bet on durability rather than a claim grounded in current earnings.

The end-market exposure is the crack in the durability story. The company itself says demand is primarily driven by new institutional and commercial building construction and by retrofit activity (FY2025 10-K, accession 0001628280-26-006372). Nonresidential construction is cyclical and rate-sensitive, and a slowdown in commercial and institutional building, the kind a higher-for-longer rate environment or a weaker economy produces, would hit the new-construction half of demand directly. The retrofit layer cushions but does not eliminate that cyclicality, and a business priced at 29 times operating income has little room to absorb a down-cycle in its core market without the multiple compressing hard.

The quality of the recent growth also deserves scrutiny. Part of the margin expansion and EPS leverage comes from integration synergies and cost discipline following the Zurn-Elkay combination, and synergy-driven margin gains eventually run out, leaving organic volume and price to carry growth. The buyback supports EPS but is being done at roughly 29 times operating income, an expensive price to retire stock, so it is returning cash at a rich multiple rather than at a bargain. If core sales growth fades toward the low single digits as construction cools and synergies lap, the only model that justified the price loses its footing, and the stock reprices toward the cluster of conservative fair values that sit far below it.

Valuation

Zurn Elkay is the textbook case of a quality compounder priced ahead of every static frame. At about $50 the market pays roughly 29 times company-wide operating income, which inverts into operating growth held near its self-funding ceiling for about eight years. The near-term growth rate is within what the company has recently delivered; the demanding part is the duration, and only about a fifth of comparable fast-growers have sustained such growth for that long, so the model flags the assumption as elevated.

The family split is stark and informative. The growth-DCF models, which are built to value durable compounding, land at or above the price, in the low $60s, while the asset-based, earnings-power, and peer-multiple families all land well below it, several in the teens to low $30s. That is not a contradiction; it is the signature of a moat. Static models value a business as if its current economics are commodity-like, so they will always call a specification-driven, margin-expanding franchise expensive. The real question is whether the moat is durable enough to make the growth-DCF the right frame.

The practical read is a high-quality business whose price requires the durability bet to pay off. The recent results, 11 percent sales growth, 160 basis points of margin expansion, and a raised outlook, are exactly what that bet needs, and the specification-driven, retrofit-supported demand base makes the durability plausible. But there is little valuation cushion: if nonresidential construction cools or synergy-driven margin gains fade, the price has to lean entirely on the one optimistic family, and the gap down to the conservative cluster is large.

Catalysts

The catalysts are the quarterly evidence on whether the compounding holds. First-quarter 2026 set a high bar: sales up 11 percent to $433 million, adjusted EBITDA up 18 percent to $116 million with margin up 160 basis points to 26.8 percent, operating profit up about 30 percent, diluted EPS up 46 percent to $0.35, and a raised outlook guiding the next quarter to 8 to 9 percent core sales growth and 27 to 27.5 percent EBITDA margin. Watch core sales growth and margin expansion against that guide, since the price assumes years of sustained high growth, and watch free cash flow, which was $43 million in the quarter.

The risk catalysts are the construction cycle and the durability of margin gains. Any softening in new institutional and commercial building activity, the primary demand driver, would pressure organic growth, so nonresidential construction indicators and order trends are the leading signals. The pace of further margin expansion matters too: as post-combination synergies lap, the question is whether organic volume, price, and mix can keep lifting margins. Capital allocation is the catalyst management controls, with the company repurchasing $50 million of stock at about $47 in the quarter; continued buybacks signal confidence but are being made at a rich multiple.

Sources: Zurn Elkay Q1 2026 results, sales $433 million up 11 percent, adjusted EBITDA $116 million, margin 26.8 percent up 160 basis points, operating profit up 29.5 percent, diluted EPS $0.35 up 45.8 percent, $43 million free cash flow, $50 million buyback at about $47, raised Q2 guidance (SEC Form 8-K, April 2026; StockTitan, Alphastreet, StocksToTrade earnings coverage); Zurn Elkay FY2025 10-K on construction- and retrofit-driven demand and the specification-driven end market (accession 0001628280-26-006372, filed Feb 9, 2026).

Peer Cohorts (Per Segment, With Filing Citations)

Zurn Elkay (whole company) (reported)

• PNR (Pentair plc)
• FY2025 10-K: …our future. We expect to execute these objectives by: • Delivering profitable revenue growth and productivity for customers and shareholders; • Continuing to focus on capital allocation through: ◦ Committing to maintain our investment grade rating; ◦ Focusing on reducing our long-term debt; ◦ Returning cash to…
• FY2025 10-K: …$3.5 million related to the possible payment of interest and recorded no liabilities for the possible payment of penalties. COMMITMENTS AND CONTINGENCIES We have been, and in the future may be, made parties to a number of actions filed or have been, and in the future may be, given notice of potential claims relating…
• IEX (IDEX CORP)
• FY2025 10-K: …expectations, expectations regarding future order volumes and order patterns, demand within end markets, availability and sufficiency of cash and financing alternatives, the impacts of any pending or threatened legal, regulatory and other proceedings involving the Company and its subsidiaries, anticipated benefits…
• FY2025 10-K: …and custom optics that is complementary to the Company's Optics Technologies solutions. Headquartered in Portage, Michigan, Micro-LAM operates in the Company's Scientific Fluidics & Optics reporting unit within the Company's HST segment. Micro-LAM was acquired for cash consideration of $ 80.4 million, net of cash…
• XYL (Xylem Inc.)
• FY2025 10-K: #8364; 250 million (approximately $ 278 million) term loan facility (the "Term Facility") the terms of which are set forth in a term loan agreement, among the Borrower, the Company, as parent guarantor and ING Bank. The Company has entered into a parent guarantee in favor of ING Bank also dated May 9, 2023 to secure…
• FY2025 10-K: …Deutsche Bank Trust Company Americas, as trustee. Incorporated by reference to Exhibit 4.1 of Xylem Inc.'s Form 8-K filed on March 11, 2016 (CIK No. 1524472, File No. 1-35229). 4.4 First Supplemental Indenture, dated March 11, 2016, by and between the Company and Deutsche Bank Trust Company Americas, as trustee.…
• WTS (WATTS WATER TECHNOLOGIES INC)
• FY2025 10-K: …warranty and service policies to its customers. The Company considers the sale of these policies as separate performance obligations. These policies typically are for periods ranging from one to three years. Payments received are deferred and recognized over the policy period. For all periods presented, the revenue…
• FY2025 10-K: …EPDs for any product produced at our facility in Franklin. In 2025, we expanded this effort globally. BLÜCHER in Denmark now offers EPDs for its drains, channels and piping products, and we also have EPDs for underfloor heating manifolds manufactured in Landau, Germany, providing customers with vital environmental…
• MWA (MUELLER WATER PRODUCTS, INC.)
• FY2025 10-K: …Inc. Form 10-K (File no. 001-32892) filed on December 14, 2023. 10.29.6+ Letter Agreement, dated December 9, 2024, by and between Mueller Water Products, Inc. and Marietta Edmunds Zakas. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on December 11, 2024.…
• FY2025 10-K: …10.1 to Mueller Water Products, Inc. Form 8-K (File no. 333-131521) filed on February 27, 2006. 2.3 Agreement and Plan of Merger, dated as of January 31, 2006, by and among Mueller Holding Company, Inc., Mueller Water Products, LLC and Mueller Water Products Co-Issuer, Inc. Incorporated by reference to Exhibit 2.1…
• FLS (FLOWSERVE CORP)
• FY2025 10-K: …yet been approved and therefore are not included in the above anticipated total investment or estimated savings. 31 Realignment Activity The following tables present our realignment activity by segment: December 31, 2025 (Amounts in thousands) FPD FCD Subtotal-Reportable Segments All Other Consolidated Total Total…
• FY2025 10-K: 5% in the case of Base Rate loans. In addition, a commitment fee is payable quarterly in arrears on the daily unused portions of the Revolving Credit Facility. The commitment fee will be between 0.080% and 0.250% of unused amounts under the Revolving Credit Facility depending on our debt rating by either Moody's or…
• NDSN (NORDSON CORPORATION)
• FY2025 10-K: …€ 30,300 of debt of the acquired companies, was funded using borrowings under the 364-Day Term Loan Facility and the Company's revolving credit facility. The 364-Day Term Loan Facility was subsequently paid off in September 2023 with the net proceeds of a senior notes offering (see Note 9 to the Consolidated…
• FY2025 10-K: 11. Executive Compensation 72 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 72 Equity Compensation Table 73 Item 13. Certain Relationships and Related Transactions, and Director Independence 73 Item 14. Principal Accountant Fees and Services 73 PART IV 74 Item…
• HAYW (Hayward Holdings, Inc.)
• FY2025 10-K: …company, as well as non-executive Board member. Prior to Azkoven, from 2018 to 2021, he served as CEO of Thyssenkrupp Elevator for Iberia and Africa, where he oversaw the company's digitalization and investment in Internet of Things solutions. 37 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED…
• FY2025 10-K: …of factors, including stock price, trading volume, and general business and market conditions. The Share Repurchase Program does not require the Company to acquire any number of shares in any specific period or at all and may be amended, suspended or discontinued at any time at our discretion. The following table…

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.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• 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.