Ingersoll Rand Inc.IRNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $77.67 per share(market-calibrated)

-17.3%

Upside to Fair Value

Current

$93.97

Pure Model

$76.27

Fair Value

$77.67

Bull Case

$92.27

Bear Case

$61.03

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

5.48%

Calibrated Growth

2.73%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $76.27.

What's Driving This Ratingfor IR

✓

CapEx already efficient

CapEx at 1.43% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 26.79% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 4.04% revenue growth, fading to 2.25% by Year 10. Revenue reaches $10.7B (vs $7.7B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $62.46/share (14.1x terminal FCF) while exit multiple gives $90.08/share (24.8x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $93.97, the market implies 5.48% perpetual growth — 323bps above the model's 2.25%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 72.66% indicates efficient cash generation. FCF reaches $2.6B by Year 10 (23.84% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.31

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.39%

Cost of Debt

Pre-tax Cost of Debt3.41%

Tax Rate27.15%

After-tax Cost of Debt2.48%

Equity Weight (E/V)88.66%

Debt Weight (D/V)11.34%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (88.66% × 10.39%) + (11.34% × 2.48%)

= 9.49%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$8.0B	$8.7B	$9.6B	$10.0B	$10.7B
EBIT	$2.1B	$2.3B	$2.6B	$2.7B	$2.9B
Tax	$579M	$634M	$698M	$729M	$780M
NOPAT	$1.6B	$1.7B	$1.9B	$2.0B	$2.1B
+ Depreciation	$479M	$524M	$577M	$603M	$645M
- Capex	$114M	$125M	$138M	$144M	$154M
- Δ NWC	$37M	$43M	$25M	$26M	$28M
Free Cash Flow	$1.9B	$2.1B	$2.3B	$2.4B	$2.6B
Discount Factor	0.913	0.762	0.635	0.530	0.404
Present Value	$1.7B	$1.6B	$1.5B	$1.3B	$1.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.6B

Terminal Growth Rate2.25%

WACC9.49%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$36.1B

PV of Terminal Value$14.6B

Exit Multiple Method

Year 10 EBITDA$3.5B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$63.3B

PV of Terminal Value$25.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$13.8B

PV of Terminal Value$14.6B

Enterprise Value$28.4B

(-) Net Debt$3.5B

Equity Value$24.9B

Shares Outstanding398M

Price per Share$62.46

Exit Multiple Method

PV of Projected FCFs$13.8B

PV of Terminal Value$25.6B

Enterprise Value$39.4B

(-) Net Debt$3.5B

Equity Value$35.9B

Shares Outstanding398M

Price per Share$90.08

Pure Model Fair Value

$76.27

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
7.49%	$93.18	$95.52	$98.30	$101.67	$105.83
8.49%	$82.58	$84.15	$85.98	$88.13	$90.69
9.49%	$73.89	$75.01	$76.27	$77.72	$79.41
10.49%	$66.60	$67.41	$68.32	$69.34	$70.51
11.49%	$60.36	$60.97	$61.63	$62.38	$63.22

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$61.03

-35.1% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.64

Base Case

$76.27

-18.8% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.31

Bull Case

$92.27

-1.8% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.11

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.04%

Year 3 Revenue Growth4.35%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin26.79%

Tax Rate27.15%

Historical Capex / Rev1.43%

NWC / Revenue11.91%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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