Ingersoll Rand Inc. (IR)

FairStock Score: 41/100 — MIXED

Key Financials

Strengths

• Mission-critical industrial applications provide customer stickiness and recurring revenue
• Free cash flow generation of $1.1B demonstrates operational cash conversion
• Reasonable leverage at 0.51 D/E ratio provides financial flexibility
• Q4 2025 net margin of 12.72% shows pricing power in core operations
• Diversified end-markets across Industrial Technologies and Precision/Science segments

Concerns

• Valuation catastrophically divorced from intrinsic value: P/E 56x with Graham Number at $19.87
• Abysmal capital returns: ROE 5.77% and ROCE 5.20% indicate shareholder value destruction
• EV/EBITDA of 70x is inexplicable for a specialty industrial machinery manufacturer
• Missing growth metrics and revenue growth data raise questions about management disclosure quality

AI Analysis

I'm examining Ingersoll Rand with considerable skepticism. At $86.66, this industrial machinery company trades at a Graham Number of just $19.87—a 336% margin of safety deficit that screams overvaluation. The P/E of 56x is simply unjustifiable for a business generating 5.77% ROE and 5.20% ROCE, metrics that barely exceed the cost of capital. This is not a compounder; it's a value destroyer. Yes, the latest quarter shows $2.1B revenue with a respectable 12.72% margin, and free cash flow of $1.1B is meaningful. But the EV/EBITDA of 70x is preposterous—I've never paid such multiples for quality, let alone mediocrity. The company operates in specialty industrial machinery with mission-critical applications, which provides some moat, but the Piotroski F-Score of 7/9 and modest ROE suggest operational excellence remains elusive. The balance sheet appears adequate with a D/E of 0.51, and the Altman Z-Score of 3.09 indicates financial stability. However, the FCF yield of 1.4% is pathetic relative to the valuation. Growth rates aren't disclosed, which troubles me—management transparency matters. The 52-week range of $65-$101 shows volatility, suggesting market uncertainty about intrinsic value. I cannot justify initiating a position here. When Mr. Market offers me a dollar of earning power at four cents on the dollar, I listen. This appears to be the inverse proposition.

Bull Case

Ingersoll Rand operates in essential industrial niches with high switching costs and recurring demand. If the company can improve ROCE toward 8-10% through operational leverage and M&A integration, and if the market re-rates it toward more reasonable multiples (25-30x P/E), shareholders could realize meaningful appreciation.

Bear Case

The valuation appears to embed perfection—any disappointment in execution or margin compression would trigger significant downside. If capital returns remain anemic at current levels and growth disappoints, this stock could easily revert to $55-60 as the market corrects its enthusiasm.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer