An independent two-stage DCF analysis by a frontier AI model.
Ingersoll Rand represents a classic compounder in the industrial sector. The key to its valuation is the 'razor and blades' model: while initial equipment sales are cyclical, they generate a long tail of high-margin, sticky aftermarket service revenue. This recurring revenue stream dampens cyclicality and underpins robust free cash flow generation.
Our intrinsic value model suggests the market accurately prices the company's quality and stability. While it may not offer explosive upside, Ingersoll Rand's disciplined M&A strategy and focus on margin expansion provide a highly visible and reliable path to long-term value creation.
We project a 7% free cash flow growth rate. This assumes mid-single-digit organic growth supplemented by consistent margin expansion through operating leverage and aftermarket service growth.
An 8% discount rate is utilized, reflecting the company's stable recurring revenue streams and strong market position, balanced against the cyclical nature of its core industrial markets.
A 2.5% terminal growth rate aligns with long-term global GDP expectations, reflecting the fundamental integration of the company's products into the global industrial economy.
Intrinsic value per share under varying discount rate and terminal growth rate assumptions.
| WACC ↓ / Terminal → | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 1.5% | $92.03 | $75.30 | $63.72 | $55.22 | $48.72 |
| 2.0% | $103.54 | $82.83 | $69.03 | $59.16 | $51.77 |
| 2.5% | $118.33 | $92.03 | $75.30 | $63.72 | $55.22 |
| 3.0% | $138.05 | $103.54 | $82.83 | $69.03 | $59.16 |
| 3.5% | $165.66 | $118.33 | $92.03 | $75.30 | $63.72 |
■ Undervalued vs current price ■ Overvalued vs current price
While industrial equipment sales grow slowly, Ingersoll Rand's focus on high-margin aftermarket services and strategic acquisitions allows FCF to grow faster than top-line revenue.
Switching costs are paramount. They ensure the longevity of the customer relationship, making the projected cash flows from aftermarket services highly reliable.
Yes, equipment sales will suffer in a recession. However, the recurring service revenue (which often makes up a significant portion of profits) provides a strong floor to free cash flow, mitigating the downside risk in the DCF model.
Disclaimer: The numbers presented on this page are for educational and entertainment purposes only. They are the result of a deterministic mathematical model fed with assumptions generated by an Artificial Intelligence (Gemini 3.1). This does not constitute investment advice. Always conduct your own due diligence before investing in the stock market.