Ingersoll Rand Inc (IR)

Rating: HOLD

HOLD (5-tier) · mature cash generator · conviction: medium

EPS basis for the forward P/E and all scenario multiples: consensus forward EPS (broker-adjusted, non-GAAP).

Methodology: Valuation triangulated across five independent anchors — Monte Carlo (Student-t + regime switching), an independent DCF, peer re-rating, a sum-of-parts, and a scenario-weighted PWEV. Figures reconciled to Alpha Vantage 2026-06-27. Each chart below sits with the part of the thesis it evidences.

General research for a skeptical institutional reader. Not personalised investment advice; no position sizing or trade instructions. Figures as of the analysis date; verify before acting.

Investment Committee Summary

📎 Download the full model (Excel) — DCF line items, scenarios, sensitivity, assumptions, and extended fundamentals.

Rating Bridge

Rating = HOLD because:

• Probability-weighted scenario value implies +3% vs spot
• Monte Carlo median implies -6% vs spot
• DCF fair value implies -23% vs spot — but this is terminal-value sensitive (exit-multiple $60 vs Gordon $49, 19% apart), so it carries less weight
• Bear case (Structural — Portfolio / End-Market Disruption) downside is -52% vs spot
• Net: reward/risk of 0.2× is not asymmetric enough for a Buy and not impaired enough for a Sell — hence Hold.

Investment Thesis

At $81.99 on a ~24x forward multiple, spot prices Ingersoll Rand as a durable quality compounder: the market pays a premium to the diversified-industrial median for the IRX operating system and a proven serial-acquisition flywheel, and expects mid-single-digit organic growth on a defended 21% margin. The engine broadly agrees but declines to extrapolate the premium. Triangulation caps fair value near the base target of ~$86 while the peer-median EV/revenue anchor implies ~$82; the independent DCF, at 9% WACC and a 20x terminal multiple, lands materially lower at ~$62, because a capital-light base earning high incremental returns still cannot justify the current multiple on cash flows alone. The rating is HOLD and the probability-weighted target of ~$83 sits within a percent of spot: upside cases need reshoring and automation to lift both growth and the multiple, which is not the base rate. The single most damaging risk is that the earnings compounding is acquisition-led rather than organic, so a short-cycle order rollover would expose volume deleverage the productivity system cannot fully offset.

The dashboard below is the whole argument on one page: spot ($79) against each valuation anchor, the scenario tree, technicals and the options-implied move.

Anti-Thesis (The Real Bear Case)

The highest-probability bear is the Industrial-PMI Recession / Inventory Reset, and it is mechanically simple. IR is a short-cycle name: roughly 20% of the earnings scenarios map to this state at the cluster level. As PMI rolls over, distributors and OEMs destock, orders fall faster than shipments, and book-to-bill drops below 1.0 for several quarters. Pricing holds longer than volume, but the volume deleverage on a fixed cost base clips the 21% margin toward 19%, and forward visibility loss de-rates the ~24x multiple that assumes steady compounding. Earnings and the multiple fall together, taking the target toward the low-$60s. The serial-acquirer model does not cushion this: bolt-ons add revenue but not cyclical protection, and leverage taken on to fund them tightens the room to buy back stock into the trough.

Key Debate

P/E Multiple explains 60% of Monte Carlo outcome variance — i.e. value is set by the multiple the market will pay, a rate/sentiment regime bet as much as an earnings bet.

Earnings-Call Disconfirmation & Sentiment

Derived signals from the MCH market-data store (Alpha Vantage transcripts + news). Quantitative tone only — a disconfirmation flag, not a substitute for reading the call.

Management vs analyst tone (2026Q1): management +0.42 vs analyst floor +0.00 → delta +0.42 (n=35 mgmt / 28 Q&A; 56th pctile across the S&P book, z +0.2).

Flag: TYPICAL — management-vs-analyst tone within the normal cross-sectional range.

News (last 365d, 980 articles): avg ticker sentiment +0.14 (bullish 20% / bearish 4%)

Scenario Analysis

The tree runs from a structural 'Structural — Portfolio / End-Market Disruption' downside ($38) to a 'Bull — Re-Rate' bull case ($144); the probability-weighted blend (PWEV $81) is +3% versus spot.

Scenario rationale — what each probability buys (the driver path behind every target):

• Structural — Portfolio / End-Market Disruption (20%, $38). Structural impairment — portfolio / end-market disruption: earnings AND the multiple compress together. Target sits below the 52-week low by construction. Drivers — implied_target: 36.43; probability: 0.2.
• Industrial-PMI Recession (17%, $58). Cyclical downturn — short-cycle industrial demand (PMI) + pricing + portfolio/automation mix weakens for 1–2 years before normalising. Drivers — implied_target: 61.87; probability: 0.17.
• Base — Organic Growth + Margin (35%, $84). Mid-cycle — normalised short-cycle industrial demand (PMI) + pricing + portfolio/automation mix; disciplined capital allocation; steady returns. Drivers — implied_target: 85.93; probability: 0.35.
• Growth — Productivity / Reshoring / Automation (20%, $115). Upside — productivity + reshoring + automation lifts earnings above mid-cycle; the multiple expands modestly. Drivers — implied_target: 116.0; probability: 0.2.
• Bull — Re-Rate (8%, $144). Upside tail — sustained tight conditions or a structural re-rate on productivity + reshoring + automation. Drivers — implied_target: 146.51; probability: 0.08.

Valuation Triangulation

Five anchors — but read them with their basis in mind. The Monte Carlo, the DCF terminal, and the peer re-rate all key off a market multiple, so they are not fully independent; only the discounted cash flows themselves are genuinely multiple-free. The discipline is to read the spread and weight the cash-based view, not to treat five numbers as five independent votes.

Peer EV/Revenue re-rate — 0% weight: it duplicates the peer-multiple information already carried by the Peer P/E anchor while ignoring margin mix; weighting both would double-count the peer view. Shown as a cross-check.

Monte Carlo — the distribution, not a point

10,000 paths, Student-t shocks (fat tails) with a regime-switching overlay. The median lands at $74 and 44% of paths finish above spot. The variance decomposition shows the p/e multiple is the dominant swing factor (60% of variance). Value is a multiple bet: fundamentals move the answer far less than the rating does.

DCF — the cash-flow anchor

Independent of the market multiple: a 5-year path, WACC 9.0%, 20x terminal FCF multiple → $60. This anchor is deliberately the heaviest (41%): it is the valuation least hostage to the current multiple regime.

Peer benchmarking — relative value

Against the peer cohort, re-rating to the peer-median forward multiple (P/E 26.189999999999998x) implies $90. A premium is only justified by superior growth/margins; otherwise it is multiple risk. Weighted just 12% so the market's mood does not drive the fair value.

Across all anchors the spread is 37% of the median — wide (genuine disagreement — the blend carries low valuation confidence).

Revenue-Segment Breakdown

The company-specific drivers behind the valuation — each segment carries its own growth, margin, multiple and capex intensity. (Tags: FACT reported · ESTIMATE from disclosures · INFERENCE judgment.)

Named Exposures

Demand & pricing cycle (FACT/ESTIMATE)

Capital intensity & shareholder returns (ESTIMATE)

Structural risk vs optionality (INFERENCE)

Industry Context — Ind Machinery

This name sits in the Ind Machinery as a diversified_industrials. short-cycle industrial demand (PMI) + pricing + portfolio/automation mix Its scenarios are not guessed in isolation — they inherit a single, shared view of the cluster's driver cycle, so the names that depend on the same event are mutually consistent.

Value chain: CAT (heavy_machinery) · DE (heavy_machinery) · HON (diversified_industrials) · PH (diversified_industrials) · CMI (heavy_machinery) · MMM (diversified_industrials) · ITW (diversified_industrials) · GWW (diversified_industrials) · PCAR (heavy_machinery) · WAB (heavy_machinery) · IR (diversified_industrials) · DOV (diversified_industrials) · OTIS (diversified_industrials) · HUBB (diversified_industrials) · XYL (diversified_industrials) · SNA (diversified_industrials) · FTV (diversified_industrials) · NDSN (diversified_industrials) · IEX (diversified_industrials) · SWK (diversified_industrials) · PNR (diversified_industrials)

Mapping note: name-level 'Structural — Portfolio / End-Market Disruption' (20%) + 'Industrial-PMI Recession' (17%) map to cluster Industrial-PMI Recession / Inventory Reset (37%); name-level 'Growth — Productivity / Reshoring / Automation' (20%) + 'Bull — Re-Rate' (8%) map to cluster Upcycle — Capex / Reshoring / Infra (28%) — the cluster row is the SUM of the mapped scenario probabilities, not a different estimate.

On the cluster's key downside — Industrial-PMI Recession / Inventory Reset () — this name implies 37% vs the cluster house view of 37% (in line with the house). The cluster's full cross-stock reconciliation governs that the names which ride the same capex cycle assign it comparable odds.

Structure: Shared State — The ind_machinery cycle is the shared macro driver. Driver — industrial capex + PMI + construction/ag/heavy-truck demand + reshoring Dispersion — Members differ by cyclicality (quality compounders vs deep cyclicals).

Model Appendix

DCF — line items

FCF is bridged: NOPAT + D&A − Capex − ΔNWC (capex intensity 3% of revenue, weighted from the segments) — not a single conversion fudge.

WACC 9.0% · Σ PV(FCF) $6B + PV(terminal) $22B = EV $27B; + net cash → equity $24B ÷ diluted shares 0.40B = $60/share (exit-multiple terminal).

• Gordon (perpetuity-growth) terminal at 2.5% → $49/share — a genuinely non-multiple, cash-based cross-check; the exit-multiple and Gordon values bracket the terminal-value risk.
• Incremental ROIC on the forecast capex ≈ 34% vs WACC 9% → above WACC — the build is value-creative.

Peer set

Peer-median fwd P/E → $90; EV/Rev → $81.

Weighted fair-value math

Sensitivity

DCF/share — WACC × terminal multiple

DCF/share — revenue CAGR Δ × op-margin Δ

Tornado — DCF/share swing by driver (widest first)

Company lever — SoP/share vs Diversified Industrial Machinery multiple (AI re-rating) (base 24x)

Consensus & Market Expectations

_Consensus figures: Alpha Vantage sell-side aggregates. Where the house view sits materially above or below the street, the divergence is itself a datum — see the thesis.

Balance Sheet & Liquidity

Balance-sheet data as of 2025-12-31 (Alpha Vantage).

Capital Allocation

Free-Cash-Flow Quality

Accounting quality: SBC 0.7% of revenue; cash conversion (OCF/NI) 233% — cash-backed.

Catalyst Calendar

• 2026-07-30 (~22d) — Quarterly earnings — est. EPS $0.80 (AV EARNINGS_CALENDAR)
• 2026-08-15 (~38d) — Short-cycle orders / book-to-bill inflection read (authored)
• 2026-12-08 (~153d) — Ingersoll Rand Investor Day / capital-allocation & M&A framework (authored)
• 2027-03-01 (~236d) — Reshoring / automation demand-pipeline update (authored)

Forecast Track Record

• EPS surprise: beat 50.0% of the last 8 quarters; average surprise +2.3%.

Competitive Moat

Narrow moat. Ingersoll Rand's IRX operating system and installed-base aftermarket give durable margins, but flow/industrial-machinery markets are competitive and fragmented; if the ~24x premium rests only on M&A-driven compounding rather than an unassailable niche, a slowing deal cadence should compress the terminal multiple toward the diversified-industrial median near 18-20x.

Moat sources:

• IRX (Ingersoll Rand Execution Excellence) operating system driving above-peer margin and integration
• Installed-base aftermarket / recurring service and consumables revenue
• Mission-critical niche flow-control and compression positions with high switching cost in specific applications
• Serial-acquisition M&A engine - execution-dependent, not a structural moat

Regulatory & Legal Risk

Probabilities and sensitivities are analyst estimates, not market-implied.

Scenario Macro & Key Risks

What the Market Is Pricing In

At the current price, the market pays 20.4× forward EPS, vs the house DCF terminal 20.0×, and a peer median 26.189999999999998×. The house DCF sits 23% below spot, so the market is pricing in more than the house case — roughly 2.2pp of revenue CAGR.

Variant perception: the house view is below-consensus, and the thesis is primarily event-driven.

Peer Quality & Weighting

Quality-weighted forward P/E: 24.7× (simple median 26.189999999999998×). Direct peers count 100%, segment 50%, broad 25%.

Historical-range cross-check: 52-week range $68–$101, centre $83 (+5% vs spot); spot sits at the 32th percentile of the range. Low-weight mean-reversion cross-check, not a fundamental anchor.

Risk / Reward & Margin of Safety

Reward/risk compares triangulated upside against the probability-weighted bear target, not the extreme tail. Bull case (Bull — Re-Rate): $144.

Assumption Register

Sensitivity-ranked drivers (widest fair-value swing first): Revenue CAGR ±3pp (19.0); Op margin ±3pp (19.0); Terminal × ±15% (16.0); WACC ±1pp (6.0); Capex intensity ±15% (3.0).

Inputs, Sources & Confidence

Every load-bearing input, labelled by type and confidence. (reported fact · company guidance · consensus estimate · market data · house estimate · inference.)

Source Log

Citation coverage: 13/14 mandated claims sourced. Filing URLs are not available via the market-data provider; company statements are cited as 10-K/10-Q via Alpha Vantage.

Load-Bearing Assumptions

DCF: WACC 9%, terminal multiple 20×, FY+5 revenue $10B. Triangulation leans 41% on DCF, 29% on PWEV.

Reasons the Thesis Could Fail (Falsifiable)

Pre-registered signals that would break the thesis — each polices a specific scenario boundary and is checked at every earnings update:

• Organic revenue growth (year-on-year, reported) < 0.01 (2 consecutive prints → Industrial-PMI Recession / Inventory Reset). Base case rests on low-single-digit organic growth normalising short-cycle demand. Two prints near flat organic would confirm the cluster PMI-reset state rather than mid-cycle, sitting at the midpoint between the base-case five-point growth and the recession-case three-point decline drivers.
• Adjusted operating margin < 0.2 (2 consecutive prints → Industrial-PMI Recession / Inventory Reset). The 21% base margin is the load-bearing assumption; sustained sub-20% margin (midpoint of Base 21% and PMI-recession 19%) would signal volume deleverage or pricing loss the IRX productivity system cannot offset.
• Book-to-bill / trailing orders growth < 0.98 (2 consecutive prints → Industrial-PMI Recession / Inventory Reset). A book-to-bill sustained below 1.0 is the earliest short-cycle signal that the mid-cycle path is turning into the inventory-reset state before it reaches the P&L.
• Net debt / EBITDA (post-M&A) > 2.5 (single event → Structural — Portfolio / End-Market Disruption). IR runs a modest -$3.57B net-cash-adjusted position and funds a serial-acquirer flywheel. Leverage stepping above ~2.5x on a large deal would raise the risk that acquisitive earnings quality, not organic productivity, is carrying the multiple.
• Free cash flow conversion (FCF / adjusted net income) < 0.9 (2 consecutive prints → Base — Organic Growth + Margin). The DCF anchor assumes high conversion on a capital-light base (capex ~1.7% of revenue). Conversion falling below 90% would indicate working-capital drag or that acquisition amortisation is masking weaker cash economics.

Fact / Inference / Speculation

• FACT: Spot $79; 52-week range $68–$101; engine rating HOLD; base-case target $83 (+5%). (source: Alpha Vantage 2026-06-27, 8 July 2026)
• INFERENCE: Triangulated FV $72 (-8% vs spot · triangulated FV); the rating tracks the Monte-Carlo + scenario-PWEV core; the cash-flow anchor sits below the multiple-discipline core.
• SPECULATION: At current prices the embedded bet is that the market keeps paying the current multiple through the capex cycle — a regime call the engine cannot verify from fundamentals alone.

Recommendation: HOLD

Balanced: triangulated fair value $72 (-8% vs spot); the outcome hinges on P/E Multiple. The debate is P/E Multiple — fundamentally a multiple/regime call.

Disclosures & Limitations

This report is for informational and research purposes only. It is not personalised investment advice and does not consider any investor's objectives, financial situation, risk tolerance, tax position, or liquidity needs.

• No suitability assessment has been performed for any individual.
• Market data may be delayed or inaccurate; figures are as of the analysis date.
• Model outputs (fair values, targets, scenario probabilities) are estimates and may be wrong.
• Forecasts are uncertain; past performance is not indicative of future returns.
• The author or publisher may hold positions in securities mentioned.
• Users should verify information against primary sources (company filings) before acting.
• Investing involves risk of loss; there is no guarantee any target price is achieved.
• Ratings follow a defined research methodology (12-month expected-return thresholds), not individual circumstances.