ESCO Technologies (ESE) just wrapped up FY 2025 with fourth quarter revenue of about $352.7 million and basic EPS of roughly $1.73, capping off a twelve month run that delivered around $1.10 billion in revenue and EPS of about $4.51. Over the past year, the company has seen quarterly revenue move from roughly $273.5 million in Q4 2024 to $352.7 million in Q4 2025, while basic EPS shifted from about $1.52 to $1.73. This leaves investors focused closely on how its margins are holding up as growth compounds.

See our full analysis for ESCO Technologies.

With the headline numbers on the table, the next step is to weigh these results against the prevailing narratives around ESCO, examining where the growth story holds up and where the margins picture might surprise the market.

TTM profit margin dips to 10.6 percent

• Trailing twelve month net income excluding extra items came in at about 116.3 million on roughly 1.10 billion in revenue, which works out to a 10.6 percent net margin compared with 11.2 percent a year earlier.
• Consensus narrative leans bullish on long term profitability, pointing to recurring utility and aerospace demand. However, the slight margin compression from 11.2 percent to 10.6 percent means investors need to watch whether grid modernization and defense backlog actually translate into the higher margins analysts expect over time.
  • Supportive signs include multi year earnings growth of about 24.8 percent annually and a 13.3 percent earnings increase in the past year, suggesting the business has been able to grow profit faster than sales over a long stretch.
  • At the same time, the recent margin step down shows that integration costs, competitive pressures, or mix shifts can still weigh on profitability even when revenues rise. This is the kind of risk the consensus narrative highlights around execution and end market volatility.

Premium valuation at 45.3x P/E

• At a share price of 204.02, ESCO is trading on a trailing P E of 45.3 times, well above both the US Machinery industry average of 24.5 times and the peer average of 26.3 times, and also above a DCF fair value of about 168.50 per share.
• Bears focus on this rich multiple, arguing that even with forecast earnings growth of roughly 24.3 percent per year and revenue growth of about 11.3 percent, the current price already embeds strong execution. Any slowdown in earnings growth from the recent 13.3 percent pace could pressure the valuation.
  • The gap between the 204.02 market price and the 168.50 DCF fair value estimate underlines how much optimism is already priced in relative to modeled cash flows.
  • Because the P E is almost twice the industry average, investors are effectively paying a growth stock price for a business whose trailing net margin has edged down from 11.2 percent to 10.6 percent. This directly challenges the bearish view that the stock might be overpaying for that growth.

On these numbers, skeptics wondering whether ESCO can grow fast enough to justify a 45x multiple may find fresh ammo in the modest margin slippage and gap to DCF fair value, while bulls can point to double digit forecast growth as a reason to keep it on a growth watchlist. 🐻 ESCO Technologies Bear Case

Discontinued ops boost reported bottom line

• In Q4 2025, earnings from discontinued operations were about 173.8 million versus a small loss of roughly 5.0 million in Q4 2024, a swing that is large relative to continuing net income excluding extra items of 44.9 million in the latest quarter.
• Bullish investors often emphasize the strong five year earnings trajectory of around 24.8 percent per year and the move toward higher quality, recurring revenues, but the heavy contribution from discontinued operations this year means the clean operating story is more nuanced than headline EPS alone suggests.
  • Trailing twelve month earnings from discontinued operations totaled about 182.9 million, which is a significant portion of the 116.3 million in net income excluding extra items, so part of the recent EPS strength reflects portfolio moves rather than only ongoing operations.
  • For a long term growth thesis built around grid modernization and aerospace backlog, separating these discontinued gains from the 1.10 billion of trailing revenue helps clarify what portion of earnings power is repeatable versus one off.

Bulls arguing that ESCO is building a higher quality, more recurring earnings base can use this quarter to dig into what portion of EPS is truly from continuing operations versus discontinued gains before leaning fully into the optimistic growth story. 🐂 ESCO Technologies Bull Case

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for ESCO Technologies on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

See the numbers differently? Take a couple of minutes to dig into the figures, refine your perspective, and turn it into a full narrative: Do it your way.

A great starting point for your ESCO Technologies research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Explore Alternatives

Despite solid top line growth, ESCO faces modest margin compression, a rich multiple against peers, and headline EPS flattered by discontinued operations rather than core earnings.

If you are uneasy about paying a premium for a stock where profitability is slipping and valuation already looks stretched, use our these 935 undervalued stocks based on cash flows to quickly spot companies with more attractive prices and fundamentals right now.

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.