<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> Using the 2 Stage Free Cash Flow to Equity, ITT fair value estimate is US$165 </li> <li> Current share price of US$179 suggests ITT is potentially trading close to its fair value </li> <li> Our fair value estimate is 21% lower than ITT's analyst price target of US$209 </li> </ul><p>Today we will run through one way of estimating the intrinsic value of ITT Inc. (NYSE:ITT) by estimating the company's future cash flows and discounting them to their present value.  We will use the Discounted Cash Flow (DCF) model on this occasion.  Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.</p><p> Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation.  If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. </p><p>This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.</p><h2> The Model </h2> <p> We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase.  To start off with, we need to estimate the next ten years of cash flows.   Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.  </p><p> Generally we assume that a dollar today is more valuable than a dollar in the future,  and so the sum of these future cash flows is then discounted to today's value: </p><h4> 10-year free cash flow (FCF) estimate </h4><table><tbody><tr><td> </td><td><strong>2026</strong></td><td><strong>2027</strong></td><td><strong>2028</strong></td><td><strong>2029</strong></td><td><strong>2030</strong></td><td><strong>2031</strong></td><td><strong>2032</strong></td><td><strong>2033</strong></td><td><strong>2034</strong></td><td><strong>2035</strong></td></tr><tr><td><strong> Levered FCF ($, Millions) </strong></td><td>US$565.5m</td><td>US$651.5m</td><td>US$730.8m</td><td>US$750.9m</td><td>US$771.4m</td><td>US$793.6m</td><td>US$817.4m</td><td>US$842.6m</td><td>US$869.0m</td><td>US$896.5m</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x6</td><td>Analyst x3</td><td>Analyst x2</td><td>Analyst x1</td><td>Est @ 2.73%</td><td>Est @ 2.89%</td><td>Est @ 3.00%</td><td>Est @ 3.08%</td><td>Est @ 3.13%</td><td>Est @ 3.17%</td></tr><tr><td><strong> Present Value ($, Millions) Discounted @ 8.4% </strong></td><td>US$521</td><td>US$554</td><td>US$573</td><td>US$543</td><td>US$515</td><td>US$488</td><td>US$464</td><td>US$441</td><td>US$419</td><td>US$399</td></tr></tbody></table><p><i>(&#34;Est&#34; = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = US$4.9b</p><p> The second stage is also known as Terminal Value, this is the business's cash flow after the first stage.  For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.4%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = US$897m× (1 + 3.3%) ÷ (8.4%– 3.3%) = US$18b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= US$18b÷ ( 1 + 8.4%)<sup>10</sup>= US$8.0b</p><p> The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value,  which in this case is US$13b.  To get the intrinsic value per share, we divide this by the total number of shares outstanding.  Relative to the current share price of US$179, the company appears   around fair value    at the time of writing.   Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/280322-dcf-1-dark-2/1763813519108?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1706" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/280322-dcf-1-dark-2/1763813519108"/><figcaption>NYSE:ITT Discounted Cash Flow November 22nd 2025</figcaption></figure> <h2> Important Assumptions </h2><p> Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows.  You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them.  The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance.  Given that we are looking at ITT as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.  In this calculation we've used 8.4%, which is based on a levered beta of 1.120. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. </p> <p><span> View our latest analysis for ITT </span></p><h3>SWOT Analysis for ITT</h3><div><div><p><strong>Strength</strong></p><ul><li>Debt is not viewed as a risk.</li></ul> <ul><li>Dividends are covered by earnings and cash flows.</li></ul> <ul> Dividend information for ITT.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Earnings declined over the past year.</li></ul> <ul><li>Dividend is low compared to the top 25% of dividend payers in the Machinery market.</li></ul> <ul><li>Expensive based on P/E ratio and estimated fair value.</li></ul> </div><div><p><strong>Opportunity</strong></p><ul><li>Annual earnings are forecast to grow for the next 3 years.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li> Annual earnings are forecast to grow slower than the American market.</li></ul> <ul> What else are analysts forecasting for ITT?</ul> </div></div><h2> Moving On: </h2><p> Valuation is only one side of the coin in terms of building your investment thesis, and it  ideally won't be the sole piece of analysis you scrutinize for a company.  The DCF model is not a perfect stock valuation tool.  Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation.  For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation.  For ITT, we've compiled three  important  elements  you should explore: </p><ol> <li> <strong>Risks</strong>: Be aware that  ITT is showing <strong> 1 warning sign in our investment analysis</strong> , you should know about...  </li> <li> <strong>Future Earnings</strong>: How does ITT's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. </li><li> <strong>Other Solid Businesses</strong>: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! </li> </ol><p>PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.</p></div></div>

<p>The intrinsic value of ITT Inc. (NYSE:ITT) is estimated at US$165 using a 2-stage Free Cash Flow to Equity model, suggesting the current share price of US$179 is close to fair value. This estimate is 21% lower than the analyst price target of US$209. The DCF model involves estimating future cash flows and discounting them to present value, highlighting the importance of discount rate and cash flow assumptions.</p>

Calculating The Intrinsic Value Of ITT Inc. (NYSE:ITT)