Regal Rexnord (RRX) has wrapped up FY 2025 with fourth quarter revenue of US$1.5 billion and basic EPS of US$0.96, alongside trailing twelve month revenue of US$5.9 billion and EPS of US$4.22 that sit against a 42.5% year over year earnings lift and a 23.4% earnings growth forecast over the next three years. Over recent periods the company has seen quarterly revenue move from US$1,461.1 million in Q4 FY 2024 to US$1,523.2 million in Q4 FY 2025, while basic EPS shifted from US$0.62 to US$0.96, helping push trailing net margin to 4.7% compared with 3.3% a year earlier. That mix of earnings momentum and firmer margins is likely to focus attention on how sustainable the current profitability profile really is.

See our full analysis for Regal Rexnord.

With the headline numbers on the table, the next step is to set these results against the most common narratives around Regal Rexnord to see which stories the data supports and which ones get questioned.

Margins Improve While Growth Skews To Profit

• On a trailing basis, Regal Rexnord converted US$5.9b of revenue into US$279.5 million of net income, giving a 4.7% net margin compared with 3.3% a year earlier, so more of each sales dollar is now showing up as profit.
• What will encourage a bullish view is that earnings grew 42.5% year over year while revenue is only forecast to grow about 3.8% a year, which heavily supports the idea that profitability gains rather than rapid sales growth are driving the improvement.
  • Supporters can also point to trailing EPS of US$4.22 for the last twelve months versus US$0.96 in the latest quarter, which shows the full year picture is stronger than a single three month snapshot.
  • At the same time, the move in net income from US$196.2 million to US$279.5 million over the trailing twelve months lines up with that margin lift and backs the earnings focused bullish angle.

Over the last year Regal Rexnord quietly turned more revenue into profit while keeping top line expectations modest, which is exactly the kind of earnings profile bulls like to build a long term story around. 📊 Read the full Regal Rexnord Consensus Narrative.

Earnings Rebound Meets Rich P/E

• With the share price at US$200, the trailing P/E sits at 47.5x, above both the US Electrical industry average of 34.7x and a peer average of 38.7x, while a DCF fair value of US$186.32 suggests the market price is above that valuation marker.
• Critics highlight that even with earnings forecast to grow about 23.4% per year, paying 47.5x trailing earnings builds in high expectations, and the valuation tension becomes clear once you stack those numbers against the DCF fair value and industry multiples.
  • On one hand, the move in trailing net income to US$279.5 million and 4.7% margin helps explain why some investors are willing to pay above both the 34.7x industry and 38.7x peer P/E levels.
  • On the other hand, the gap between the US$200 share price and the US$186.32 DCF fair value gives bears a concrete figure to point to when they argue the stock price already reflects a strong growth outlook.

Interest Coverage Stands Out As Key Risk

• Across the last twelve months, one flagged issue is that earnings have not comfortably covered interest payments, even as net income reached US$279.5 million on US$5.9b of revenue and margins improved to 4.7%.
• Skeptics warn that weak interest coverage can limit flexibility if conditions tighten, and the risk case leans on the combination of this coverage pressure, significant insider selling in the last three months, and a valuation above both the US$186.32 DCF fair value and the 34.7x industry P/E benchmark.
  • The trailing 42.5% earnings growth and forecast 23.4% annual growth over the next three years sit in sharp contrast to that interest coverage concern, which is why bears focus more on the balance sheet side of the story.
  • Because revenue is only expected to grow around 3.8% a year against a 10.3% US market revenue forecast, critics see less room for top line upside if higher earnings are needed to strengthen coverage ratios.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Regal Rexnord's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Regal Rexnord carries a relatively high 47.5x P/E, softer interest coverage and a share price above its DCF fair value marker. Taken together, these factors highlight valuation and balance sheet pressure.

If those pressure points make you prefer sturdier financial footing, take a few minutes to scan our solid balance sheet and fundamentals stocks screener (46 results) and look for companies with stronger coverage and resilience.

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.