Assessing ITT’s Value After a 31% Surge and Global Expansion News
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Wondering if ITT is a bargain or overpriced right now? You are not alone, as many investors are looking for smart ways to spot hidden value in today’s market.
ITT’s stock price has climbed 5.6% in just the past week and is up a striking 31.0% year-to-date, building on a strong 174.9% gain over the last five years.
That impressive momentum has caught the attention of analysts after recent headlines highlighted ITT’s expansion into new global markets and strong demand for its industrial solutions, both of which have fueled investor optimism and trading volumes.
Despite the buzz, ITT currently scores just 1 out of 6 on our valuation check. Let’s take a closer look at what traditional valuation approaches say, and stay tuned for a better perspective at the end.
ITT scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and then discounting those amounts back to the present using a rate that reflects the investment’s risk. This approach gives investors an idea of what a business is truly worth based on its ability to generate cash.
For ITT, the most recent reported Free Cash Flow (FCF) stands at $540.2 Million. Analysts provide cash flow projections for the next five years, after which Simply Wall St extends these estimates further to build a 10-year outlook. By the end of 2029, ITT’s FCF is forecast to reach approximately $750.9 Million. These growth projections suggest a steady upward trend in the company’s ability to generate cash.
After discounting all those future cash flows to today’s dollars, the model calculates ITT’s intrinsic value at $164.61 per share. Compared to the current trading price, this means the stock is around 12.9% above its fair value according to this analysis. Based on this, it appears overvalued from a pure cash flow standpoint.
The Price-to-Earnings (PE) ratio is widely regarded as a valuable yardstick for assessing profitable companies like ITT, as it measures how much investors are willing to pay for each dollar of current earnings. This makes it particularly useful for comparing established businesses with consistent profitability.
However, what’s considered a “normal” PE ratio depends heavily on expectations for future earnings growth and level of risk. Fast-growing companies or those seen as lower risk typically trade at higher PE multiples, while slower growers or riskier firms settle at lower levels. This context is key to making meaningful comparisons.
Right now, ITT is trading at a PE ratio of 30x. That is above the Machinery industry average of 23.9x and a bit below the average of its closest peers at 32.8x. Simply Wall St’s proprietary “Fair Ratio” for ITT, calculated based on the company’s growth profile, profit margins, industry dynamics, market cap and associated risks, is 25.5x. The Fair Ratio offers a more tailored benchmark than industry or peer averages, as it aims to reflect what is justified for ITT specifically given its unique mix of qualities and risks.
With ITT’s current PE ratio sitting noticeably above its Fair Ratio, the analysis points to the shares being overvalued based on this method.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your unique investment story and viewpoint for a company. It connects your perspective on ITT’s future with a financial forecast and, ultimately, a fair value estimate. Instead of relying only on static ratios or historical numbers, Narratives let you outline the reasons behind your assumptions about ITT’s revenue growth, earning power, and what you believe the business is worth.
This approach bridges a company’s story with numbers, making your investment thesis actionable and clear. Narratives are designed for everyone and are accessible right on Simply Wall St’s Community page, where millions of investors share and compare their viewpoints. By creating or following a Narrative, you can see exactly how your logic leads to a specific fair value. You can also quickly spot when the current share price offers a buying or selling opportunity. In addition, Narratives update automatically as new news or earnings reports come in, ensuring your view always reflects the latest information.
For example, one investor’s Narrative for ITT might focus on strong backlog growth and business innovation, supporting a bullish fair value of $202, while another leans cautious due to global risk factors, setting their fair value closer to $141.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ITT.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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