Gates Industrial (GTES) moved higher after investors reacted to President Trump’s proposed US$1.5 trillion defense budget for 2027 and steadier energy costs, which together lifted interest in industrial and engineered components names.

That move sits within a mixed year for the stock, with a 1-day share price return of 1.33% and 7-day gain of 3.31% set against a 90-day share price return of 6.79% decline. The 1-year total shareholder return of 15.45% and 3-year total shareholder return of 79.03% suggest longer term holders have generally been rewarded, while recent momentum appears to be rebuilding from a softer patch.

If this kind of policy driven interest in industrial names has your attention, it could be a useful moment to widen your watchlist with aerospace and defense stocks.

With Gates Industrial trading at US$22.79 and sitting about 20% below one valuation estimate and roughly 22% under a published price target, the key question is whether this gap signals an opportunity or if markets are already pricing in future growth.

Most Popular Narrative: 18.1% Undervalued

Gates Industrial's most followed narrative points to a fair value of US$27.84 versus the last close at US$22.79, setting up a material valuation gap built on specific growth and margin expectations.

Rapid expansion in the data center liquid cooling market is driving increasing demand for Gates' fluid transfer and specialized power transmission products, with recent design wins and a growing opportunity pipeline expected to accelerate revenue growth and margin expansion in 2026 and beyond.

Curious what earnings path and profit margins are assumed to support that higher value, and what kind of future P/E multiple ties it all together? The full narrative lays out a detailed revenue ramp across newer end markets, a step up in profitability and the valuation math used to translate those forecasts into today's price.

Result: Fair Value of $27.84 (UNDERVALUED)

However, this depends on end markets remaining stable. Prolonged weakness in industrial OEM and construction demand, or ongoing trade tension costs, could both undermine the optimistic outlook.

Build Your Own Gates Industrial Narrative

If you look at the numbers and come to a different conclusion, or simply prefer to test your own assumptions, you can build a custom view in just a few minutes, starting with Do it your way.

A great starting point for your Gates Industrial research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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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.