• If you are wondering whether Pentair at US$76.42 is cheap, expensive or somewhere in between, this article focuses squarely on what the current price says about value.
• The stock has risen 2.8% over the past week and 7.9% over the past month, even though it is still down 27.5% year to date and 25.5% over the past year, while the 3 year and 5 year returns sit at 22.4% and 19.9% respectively.
• Recent coverage of Pentair has focused on how the stock's longer term returns compare with its more recent share price decline. This has put valuation back in focus for many investors. There has also been ongoing attention on how broader market sentiment is affecting companies with similar profiles, giving extra context to these price moves.
• On Simply Wall St's valuation checks Pentair currently has a valuation score of 6/6. The rest of this article will walk through the methods behind that result before ending with a broader way to think about what the valuation really means for you.

Approach 1: Pentair Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what Pentair stock could be worth by projecting the company’s future cash flows and then discounting those back to today’s value using a required return. It is essentially asking what all those future cash flows are worth in today’s dollars.

Pentair’s latest twelve month Free Cash Flow is about $711.2 million. Using a 2 Stage Free Cash Flow to Equity model based on analyst inputs and extended projections from Simply Wall St, forecast Free Cash Flow reaches $1,315.5 million by 2035, with intermediate projections such as $835.9 million in 2026 and $1,056.7 million in 2029. Analysts directly provide estimates only for the earlier years, while the later figures are extrapolated.

When these projected cash flows are discounted back, the DCF model suggests an intrinsic value of about $99.54 per Pentair share. Compared with the current share price of $76.42, this implies the stock is trading at a 23.2% discount, which indicates Pentair appears undervalued on this cash flow view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Pentair is undervalued by 23.2%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Approach 2: Pentair Price vs Earnings

For a profitable company like Pentair, the P/E ratio is a useful way to relate what you pay for the stock to the earnings it generates. Investors usually accept a higher P/E when they expect stronger earnings growth or see lower risk, and look for a lower P/E when growth expectations are modest or risks are higher.

Pentair currently trades on a P/E of 18.8x. This sits below the Machinery industry average P/E of about 28.2x and below the broader peer group average of 30.7x, so the stock is priced at a lower multiple of earnings than these benchmarks.

Simply Wall St’s Fair Ratio for Pentair is 25.3x. This proprietary metric estimates what a more tailored P/E could look like after considering factors such as Pentair’s earnings growth profile, profit margins, risk characteristics, industry and market cap. Because it is based on company specific fundamentals rather than simple comparisons, it can provide a more nuanced reference point than raw industry or peer averages.

Comparing the Fair Ratio of 25.3x with the current P/E of 18.8x suggests Pentair trades below this implied level. This indicates that the stock may be undervalued on this earnings multiple approach.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Pentair Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story to Pentair, link that story to your own revenue, earnings and margin forecasts, translate those forecasts into a Fair Value you can compare with the live share price to judge whether Pentair looks cheap or expensive for you, and then keep that view current as new news or earnings arrive. This is why some investors might lean toward a higher Fair Value near the bullish US$130 narrative, while others sit closer to the cautious US$75 to US$90 range based on their different assumptions about the company’s future.

Do you think there's more to the story for Pentair? Head over to our Community to see what others are saying!

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.