Pentair (PNR): Profit Margin Softness Tests Premium Valuation Narrative

Pentair (PNR) reported a net profit margin of 15.8%, slightly down from 16.3% last year. Recent earnings growth turned negative following a five-year annual average growth rate of 9.6%. Looking ahead, earnings are forecast to grow at around 12% per year. However, this pace is slower than both the broader US market and the company's own revenue growth projections. With high quality reported earnings and the stock trading below an estimated fair value, investors are weighing slower near-term growth and a premium price-to-earnings ratio against a solid multi-year profit track record.

See our full analysis for Pentair.

The next section puts these earnings numbers in context by comparing them to the market's most widely followed narratives for Pentair. It highlights which stories hold up and which might need a second look.

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Premium Price Relative to Peers

• Pentair’s price-to-earnings ratio is 27.3x, which is well above both the peer group average of 22.6x and the broader US Machinery industry average of 24.3x. This suggests the market is assigning a valuation premium based on perceived quality and future potential.
• Analysts' consensus view notes that while Pentair is trading at a higher multiple, part of this premium is justified by high-quality earnings and expectations for margin expansion. This comes even as forecast revenue growth of 3.9% annually underperforms the US market average of 10.1%.
  • The modest 5.4% gap between the current share price of $109.02 and the consensus price target of 119.42 points to limited upside. This shows that analysts see Pentair as fairly valued in light of these dynamics.
  • The company’s below-average revenue growth puts more pressure on margin gains and operational improvements to support this valuation.
• See how the market’s view on Pentair aligns with analysts’ fair value and these premium ratios by reading the full consensus perspective. 📊 Read the full Pentair Consensus Narrative.

Margins Set to Rebound

• Profit margins are forecast to rise from 14.9% today to 20.6% over the next three years, sharpening the focus on Pentair’s ability to convert incremental revenues into profits despite currently lagging revenue growth.
• As highlighted in the consensus narrative, operational changes such as the divestiture of lower-margin service segments and ongoing digitalization are expected to drive sustainable margin improvement and insulate cash flows.
  • Analysts expect these improvements will help Pentair’s earnings reach $943.8 million by 2028, up from $609.4 million today, even as volume growth in core segments remains soft.
  • The upward margin trajectory partly offsets questions about slower revenue expansion, giving bulls confidence that efficiency, not just top-line growth, will fuel returns.

Resilient Through Market Cycles

• The five-year average annual earnings growth rate of 9.6% stands out, showing Pentair’s ability to deliver steady profit gains despite last year’s temporary negative growth print.
• Consensus narrative highlights how strategic portfolio shifts, with a focus on higher value filtration and technology-driven segments, are expected to support multiple years of above-trend, more resilient financial performance.
  • Exiting lower-margin businesses and investing in innovation is designed to blunt the impact of housing sector cyclicality and pricing volatility, smoothing earnings through downturns.
  • Rising global demand for smarter, more sustainable water solutions is expected to provide a long-term tailwind for both revenue and margins, reinforcing Pentair’s defensive appeal within the sector.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Pentair on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Pentair.

See What Else Is Out There

Pentair’s revenue growth outlook lags behind peers and the market. This puts greater pressure on margin gains to achieve meaningful long-term upside.

If you’d prefer companies with more consistent financial momentum, use stable growth stocks screener (2087 results) to focus on steady performers delivering reliable growth year after year.

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.

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