Last Update 06 Feb 26

ULS: Lowered Price View Will Support Future Upside Potential

Analysts have reduced their price target on UL Solutions to $85 from $96, reflecting updated views on valuation while fair value, discount rate, revenue growth, profit margin, and future P/E assumptions remain relatively unchanged.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the new US$85 price target as still consistent with UL Solutions maintaining a valuation that reflects its existing fair value and P/E framework, rather than a wholesale reset of expectations.
The relatively unchanged assumptions on revenue growth and profit margins signal confidence that the core business model and execution track remain intact, even with a lower target.
Keeping the discount rate steady suggests analysts do not see a material shift in the company specific risk profile, which can be important for investors comparing UL Solutions to peers.
The limited adjustment in underlying model inputs points to an incremental recalibration of expectations instead of a negative call on long term fundamentals.

Bearish Takeaways

Bearish analysts interpret the move from US$96 to US$85 as a sign that prior valuation levels were too rich based on the current earnings outlook, even if the core assumptions stayed broadly similar.
The lower target implies less upside potential from recent trading levels, which can make the risk reward profile less compelling for investors seeking strong capital appreciation.
Holding revenue growth and margin assumptions steady while cutting the target suggests concern that the market may have been applying an overly generous multiple to UL Solutions.
The revision highlights that, even without a major change in operational assumptions, small tweaks to valuation inputs can have a meaningful impact on target prices, which may keep some investors cautious.

What's in the News

UL Solutions completed a US$975 million follow-on equity offering of 12,500,000 Class A shares at US$78 per share, with a US$2.145 discount per share (Key Developments).
UBS Securities LLC joined as co-lead underwriter on the US$975 million follow-on equity deal, adding another large bank to the syndicate (Key Developments).
Several classes of UL Solutions stock and equity-based awards, including Class A and Class B common stock, stock options, restricted stock units and performance share units, are subject to lock-up agreements running from 3 Dec 2025 to 2 Feb 2026, limiting potential secondary selling during that period (Key Developments).
UL Solutions launched a plug-in solar system testing and certification program based on UL 3700, aimed at setting safety and performance criteria for so-called balcony solar systems that connect via standard household outlets, which may matter for manufacturers targeting renters and smaller scale installations (Key Developments).
The company is expanding its testing footprint, including a planned electromagnetic and wireless laboratory in Neu Isenburg, Germany, and a new motor energy efficiency laboratory in Ise, Japan, focused on electric motors used in appliances, robotics and industrial automation (Key Developments).

Valuation Changes

Fair Value: Fair value is unchanged at US$90.61, indicating no adjustment to the core valuation anchor used in the model.
Discount Rate: The discount rate is slightly lower at 7.21%, compared with 7.26%. This reflects a small change in the rate applied to future cash flows.
Revenue Growth: Revenue growth stays effectively flat at 5.76%, with only a rounding-level difference from the prior 5.76% input.
Net Profit Margin: The net profit margin is steady at about 15.34%, with the updated figure closely aligned to the previous assumption.
Future P/E: The future P/E is fractionally lower at 41.60x, compared with 41.65x, indicating only a minimal change in the valuation multiple applied.

Planned expansions and new facilities could increase capital expenditures, impacting free cash flow but potentially supporting future revenue growth.
Global macroeconomic uncertainty and geopolitical risks may affect product demand, innovation, and revenue stability despite efforts to capture market growth.
UL Solutions' robust revenue growth, strong profitability, strategic investments, and stable income streams position the company for sustained success and future expansion.

Catalysts

About UL Solutions

Provides testing, inspection and certification, and related software and advisory services worldwide.What are the underlying business or industry changes driving this perspective?

Planned expansions in testing facilities in Plano, Texas and Carugate, Italy could lead to increased capital expenditures, impacting free cash flow. However, these expansions are expected to address demand for sustainable HVAC systems, potentially supporting future revenue growth.
The development of a new global fire science center in Illinois and an advanced automotive electromagnetic compatibility lab in Japan could increase upfront costs but might enhance revenue by capturing more of the growing market demand for fire safety and automotive testing services.
While there is potential for increased revenue from product recertification due to tariff-induced manufacturing shifts, this is tempered by global macroeconomic uncertainty which could impact the pace of product demand and innovation, affecting revenue stability.
There are potential geopolitical and economic risks that could impact customer decision-making and innovation timelines, possibly affecting future revenue streams if the macro environment constrains customer budgets or shifts priorities.
The increased effective tax rate due to changes in the OECD’s Pillar 2 could reduce net income relative to prior years, impacting overall earnings growth, despite strong first-quarter financial performance.

UL Solutions Earnings and Revenue Growth

UL Solutions Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming UL Solutions's revenue will grow by 6.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 11.1% today to 13.6% in 3 years time.
Analysts expect earnings to reach $477.8 million (and earnings per share of $2.36) by about September 2028, up from $327.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.2x on those 2028 earnings, down from 40.3x today. This future PE is greater than the current PE for the US Professional Services industry at 26.3x.
Analysts expect the number of shares outstanding to grow by 0.38% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.1%, as per the Simply Wall St company report.

UL Solutions Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

UL Solutions experienced consolidated revenue growth of 5.2% year-over-year, with organic growth of 7.6%, demonstrating strong demand across all segments, potentially leading to sustained or increased revenues.
Profitability improved with adjusted EBITDA growing 22.9% year-over-year, and adjusted EBITDA margin expanding by 320 basis points, indicating strong operational leverage and disciplined expense management, which could positively impact net margins.
The company is making strategic investments in expanding facilities, such as HVAC testing in the U.S. and Italy, and a new EMC lab in Japan, aligning with industry trends that could drive sustained or increased revenues.
The recurring revenue model from ongoing product certifications, which can yield additional revenue from product redesigns and manufacturing shifts, suggests a stable, reliable income stream that could support consistent earnings.
Strong cash flow generation and a robust balance sheet, with substantial free cash flow and investment-grade credit ratings, provide flexibility for strategic initiatives and potential acquisitions, which could enhance future earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $71.27 for UL Solutions based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $78.0, and the most bearish reporting a price target of just $59.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.5 billion, earnings will come to $477.8 million, and it would be trading on a PE ratio of 37.2x, assuming you use a discount rate of 7.1%.
Given the current share price of $65.61, the analyst price target of $71.27 is 7.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on UL Solutions?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

ULS: Declining Revenue Forecasts Will Offset Improvements In Profit Margins