Regal Rexnord (RRX) stock moved sharply after the company reported strong contract wins in data center power management, with orders up 54% year over year, highlighting this segment despite mixed quarterly results.

Even after a sharp pullback, with the share price down 4.76% over the last day to $218.45, Regal Rexnord still shows strong momentum, highlighted by an 18.73% 90 day share price return and a 49.52% year to date share price return. The 1 year total shareholder return of 45.22% points to gains that go beyond recent data center headlines and earlier enthusiasm around portfolio changes and a prominent fund taking a long position.

If the data center power story has your attention, it could be a good moment to see what else is moving in critical infrastructure and power, starting with 35 power grid technology and infrastructure stocks

With Regal Rexnord trading at $218.45, not far from some estimates of intrinsic value and below the average analyst price target, the key question is whether recent data center excitement leaves upside on the table or if the market is already pricing in future growth.

Most Popular Narrative: 13.5% Undervalued

Against Regal Rexnord's last close at $218.45, the most followed narrative points to a fair value around $252.40, which frames the recent data center momentum in a much broader earnings and cash flow story.

The accelerating adoption of energy-efficient and electrification solutions across industrial and commercial sectors continues to drive incremental demand for high-efficiency motors, subsystem solutions, and customized powertrain products segments where Regal Rexnord is gaining traction, supported by regulatory tailwinds and sustainability initiatives. This positions the company for outsized revenue growth and improved pricing power over the medium and long term.

Want to see what justifies that higher fair value for Regal Rexnord? The narrative leans on faster earnings growth, wider margins, and a richer profit multiple than many investors might expect.

Result: Fair Value of $252.40 (UNDERVALUED)

However, rare earth magnet supply disruption or a weaker rebound in short cycle industrial demand could quickly challenge the current Regal Rexnord growth narrative.

Another View: What Multiples Say About Regal Rexnord

There is a twist when Regal Rexnord is viewed through its P/E ratio. The stock trades at 50.8x earnings, above the US Electrical industry average of 39.7x and also above a fair ratio of 48.9x, which points to some valuation stretch even if peers trade richer.

Put simply, the P/E gap suggests investors are already paying up for Regal Rexnord. The key question is whether future delivery justifies staying above that fair ratio or whether the market could drift closer to it over time.

Next Steps

With mixed signals on valuation and sentiment around Regal Rexnord, it can be useful to look past headlines and review the underlying data directly. For a concise summary of what the market currently identifies as the main concerns and potential upside, consider taking a moment to review the 2 key rewards and 2 important warning signs

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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.