How we define BUY, HOLD and SELL
BUY: every combination in the valuation sensitivity grid implies a fair value above the current price — i.e. even the most conservative reasonable assumptions still suggest the stock is cheap. SELL: every combination implies a fair value below the current price — even the most generous reasonable assumptions still suggest it's expensive. HOLD: the current price falls inside the sensitivity grid's range — reasonable analysts using different defensible assumptions could land on either side, so a confident directional call isn't supported by this analysis. This is a narrower, more literal use of these labels than some research uses — a HOLD here specifically means the valuation math doesn't clear a bar in either direction, not a vague default.
Where the valuation methods land
Per-share values from this note, against the $87.56 price (vertical line). The DCF base case sits almost on the price and the sensitivity grid brackets it; the peer multiples sit mostly above it, with Pentair far below. We use no peer median.
Investment note
Rating and base case
Rating: HOLD. At $87.56 (October 12, 2026), DCI sits inside our DCF sensitivity grid ($60.52 to $118.34 per share), and the base case of $88.79 is only 1.4% above the price (a margin of safety of 1.4%), so reasonable assumptions land on either side of the price and our rating rule produces HOLD. The peer multiples do not settle the question: Parker-Hannifin's 33.6x implies $129.35 per share, while Pentair's 13.5x implies $52.12, so we use no peer median and treat the spread as context (see Comparable companies).
Results
Results: FY2026 (year ended July 31, 2026) net sales were $3,885.6M against $3,690.9M, up 5.3% (10-K PDF p.40). Net earnings were $453.8M (PDF p.73) and diluted EPS $3.85 versus $3.05 (PDF p.40); the company reports adjusted EPS of $3.98 (Q4 earnings release of August 26, 2026, p.1). Operating income rose to $599.9M from $495.4M, a 15.4% margin (PDF p.40).
Operating trends
Operating trends: operating income grew 21.1% on sales growth of 5.3%, so profitability recovered faster than volume (10-K PDF p.40, our arithmetic). The Facet acquisition added about $30M of fourth-quarter sales with $0.06 of EPS dilution, and management guides Industrial Solutions sales up mid-teens in FY2027 with $0.12 of Facet dilution in EPS (Q4 earnings release p.1, 4), so the earnings case rests on that recovery and the integration.
Guidance
Guidance: for FY2027 management expects sales growth of 5.5% to 9.5% and EPS of $4.22 to $4.38, capital expenditures of $70M to $90M, free cash flow conversion of 95% to 105%, and repurchases of about 1% of shares outstanding (Q4 earnings release p.1, 5). The EPS midpoint of $4.30 is 11.7% above FY2026 GAAP EPS of $3.85 (our arithmetic). No earnings-call transcript was supplied, so no analyst Q&A is cited.
Cash flow and the DCF basis
Cash flow and the DCF basis: operating cash flow was $493.7M and capital expenditures $67.4M, giving a free cash flow base of $426.3M, about 94% of net earnings (10-K PDF p.73). We apply an 8.5% discount rate (our judgment, reflecting moderate leverage and a steady franchise), 3.0% terminal growth, and an explicit growth path of 14.0%, 9.0%, 7.0%, 6.0%, 5.0%, 4.5%, 4.0%, 3.5%, 3.25% and 3.0% over ten years, a path that compounds at 8.2% for five years and 5.9% for ten against FY2024 to FY2026 free cash flow growth of 2.4% a year and sales growth of 4.1% a year; terminal value is 60.7% of the total. Year-one free cash flow of $486.0M sits inside the roughly $461M to $529M implied by guided EPS, about 115M average shares and 95% to 105% conversion (our arithmetic; the release gives no dollar cash flow forecast). Using the three-year average free cash flow of $391.0M instead gives $81.44, so the result is sensitive to which year is treated as normal. At the same assumptions the price implies a starting free cash flow of about $420M, 0.99x the FY2026 base, so the market is paying roughly for our path and little more. We chose it over a faster-growing alternative (base $95.84) because that alternative compounds free cash flow at 9.6% for five years, well above anything in the FY2024 to FY2026 record.
Balance sheet
Balance sheet: total debt was $1,324.8M (short-term borrowings $44.8M plus long-term debt $1,280.0M) against cash of $250.4M, or net debt of $1,074.4M (10-K PDF p.71). Net debt is shown for context only and is not deducted from fair value, because the cash flow base is already after interest.
Comparable companies
Comparable companies: on filings and October 12, 2026 closing prices supplied by NovaRock, Parker-Hannifin trades at 33.6x FY2026 GAAP EPS of $28.48, implying $129.35 per share for DCI on its $3.85; Pentair trades at 13.5x trailing GAAP EPS of $3.88 (FY2025 $3.93 plus first-half 2026 $1.78 less first-half 2025 $1.83), implying $52.12; IDEX trades at 33.9x trailing GAAP EPS of $6.95 (FY2025 $6.41 plus first-half 2026 $3.54 less first-half 2025 $3.00), implying $130.61. DCI itself trades at 22.7x FY2026 EPS. On EV/EBITDA, built from filings as trailing operating income plus depreciation and amortization, DCI trades at 15.9x on $705.9M (enterprise value $11,223.5M), Parker-Hannifin at 21.4x on $6,005M, IDEX at 19.5x on $954.4M and Pentair at 10.7x on $933.8M (trailing operating income of $813.2M plus depreciation and amortization of $120.6M, enterprise value $10,003.0M); applying those to DCI and deducting net debt of $1,074.4M implies $121.19, $109.54 and $55.97 per share (+38.4%, +25.1% and -36.1%). Pentair's trailing figures are its FY2025 results (operating income $857.5M, depreciation $59.6M, amortization $58.1M) plus the first half of 2026 less the first half of 2025 (Q2-2026 release). On trailing P/E the DCF implies +1.4% against the price and the peers imply +47.7% (PH), +49.2% (IDEX) and -40.5% (PNR); we do not average any of them. Pentair reported a 17% sales decline from a Pool channel destock, and Parker-Hannifin is many times DCI's size.
Shareholder base and changes
Shareholder base and changes: shares outstanding fell 3.4% in two years, from 120.11M at July 31, 2024 to 115.99M at July 31, 2026 (10-K PDF p.71 and p.107, our arithmetic), with 115,910,129 on the September 11, 2026 cover. Treasury purchases were $163.3M, $333.6M and $108.5M in FY2024 to FY2026 (PDF p.76). DCI has no controlling holder. The 2026 proxy statement (record date September 21, 2026, 115,820,533 shares) lists BlackRock at 10,954,890 shares (9.5%), State Farm at 9,600,103 (8.3%), Vanguard Portfolio Management at 6,535,093 (5.6%) and Vanguard Capital Management at 6,064,424 (5.2%), with all directors and officers as a group (15 persons) at 2,627,045 shares (2.2%) and Tod Carpenter at 1,677,448 (1.4%) (proxy PDF p.15, 17). The BlackRock figure rests on a Schedule 13G/A dated January 24, 2024 (10,954,890 shares, 9.1% of the class at December 31, 2023) and the State Farm figure on a Schedule 13G/A signed February 7, 2024 (9,600,103 shares, 7.99%); the proxy gives February 12, 2024 as State Farm's filing date and expresses both holdings against the smaller record-date share count, which is why its percentages are higher, and the Vanguard figures on Schedule 13Gs of April 29, 2026 (event date March 31, 2026); The Vanguard Group itself now reports zero after its January 12, 2026 realignment. These holders are as of the proxy date, not a current snapshot, and NovaRock reports no later BlackRock or State Farm filing exists on EDGAR.
Capital return
Capital return: DCI paid $141.2M of dividends and $111.2M of buybacks in FY2026 (cash flow statement, PDF p.73), $252.4M in total, a 1.4% dividend yield and a 1.1% buyback yield, 2.5% in total on a $10,149.1M market capitalization at $87.56 (our calculation; buybacks are gross, not net of issuance). The dividend was $1.24 per share (PDF p.76), 31.1% of reported net earnings, covered 3.0 times by free cash flow; total returns are 59% of free cash flow and do not exceed it.
Conclusion
Conclusion: HOLD, because the price sits inside the range our assumptions produce and the base case is only 1.4% above it. A path to the guided FY2027 EPS of $4.22 to $4.38 with free cash flow near the top of the $461M to $529M range would move the case toward the upper part of the grid, while slower Industrial recovery or Facet integration would weigh on it. A reviewer who gives more weight to Parker-Hannifin's multiple could reasonably lean positive, and one who weights Pentair's could lean negative.
Key catalysts
- Facet integration: FY2027 EPS guidance of $4.22 to $4.38 includes about $0.12 of Facet dilution (Q4 earnings release p.4).
- Industrial Solutions recovery: management guides FY2027 Industrial sales up mid-teens (Q4 earnings release p.4).
- Annual meeting on November 20, 2026 (director elections, say-on-pay, auditor ratification; proxy and notice of internet availability).
- Q1 FY2027 results (quarter ending October 31, 2026), the first read on guidance versus Facet integration.
Comparable companies cross-check
DCF implies +1.4% vs. current price; the peer multiples span a wide range and are shown individually with no median or average. Trailing P/E spans 13.5x to 33.9x (two near 34x, Pentair far lower) and EV/EBITDA spans 10.7x (PNR) to 21.4x (PH), with IDEX at 19.5x; no peer is a close comparable and no median is used.
| Peer / metric | Multiple | DCI value / share | Role |
|---|---|---|---|
| PH — trailing P/E (FY2026 GAAP EPS $28.48) | 33.6x | $129.35 | Context: much larger, aerospace-heavy |
| PNR — trailing P/E (TTM GAAP EPS $3.88) | 13.5x | $52.12 | Context: Pool channel destock |
| IEX — trailing P/E (TTM GAAP EPS $6.95) | 33.9x | $130.61 | Context: AI/semiconductor-driven mix |
| PH — EV/EBITDA (TTM op. income + D&A $6,005M) | 21.4x | $121.19 | Context: much larger, aerospace-heavy |
| IEX — EV/EBITDA (TTM op. income + D&A $954.4M) | 19.5x | $109.54 | Context: AI/semiconductor-driven mix |
| PNR — EV/EBITDA (TTM op. income + D&A $933.8M) | 10.7x | $55.97 | Context: Pool channel destock |
| DCI today | 22.7x P/E, 15.9x EV/EBITDA | $87.56 | Enterprise value $11,223.5M |
Peer prices are October 12, 2026 closes supplied by NovaRock (not filing-verified). EPS and share data come from each peer's own filings: PH FY2026 release (Aug 6, 2026), PNR Q2-2026 release (Jul 28, 2026), IEX FY2025 10-K and Q2-2026 release (Jul 29, 2026). All three peers use trailing GAAP EPS through June 2026 against DCI FY2026 GAAP EPS of $3.85 (IDEX TTM = FY2025 $6.41 from its 10-K plus H1 2026 $3.54 less H1 2025 $3.00). Pentair is an outlier: its earnings are depressed by a Pool channel destock. EV/EBITDA is unadjusted trailing operating income plus depreciation and amortization from each company's filings, less net debt from the latest balance sheet (no leases, pensions or minorities); PNR EV/EBITDA uses a price back-solved from the supplied 13.5x P/E ($52.53), the Q2-2026 diluted weighted average share count (161.6M; no period-end count was in the release), and net debt at June 30, 2026 of long-term debt $1,606.0M less cash $91.8M (no short-term borrowings line is reported); depreciation and amortization are from Pentair's FY2025 and Q2-2026 releases.
Balance sheet & leverage
| Item | Value |
|---|---|
| Total debt | $1,324.8M |
| Cash & equivalents | $250.4M |
| Net position | $1,074.4M net debt |
Informational only — not subtracted from the fair value above. The cash flow base is already levered (post-interest), so a separate net-debt deduction would double-count it.
Capital return detail
| Item | Value |
|---|---|
| Dividends paid | $141.2M (1.4% yield) |
| Dividend per share | $1.24 |
| Buybacks (gross cash) | $111.2M (1.1% yield) |
| Total returned | $252.4M (2.5% of market cap) |
| Dividend payout ratio (reported net earnings) | 31.1% |
| Dividend cover by free cash flow | 3.0x |
| Total returns as % of free cash flow | 59% |
Gross cash buybacks (not net of share issuance); market cap = price x shares outstanding.
Shareholding pattern & changes
| Period | Shares out. | YoY | Cumulative | Buybacks ($M) | Source |
|---|---|---|---|---|---|
| Jul 2024 | 120.11M | — | — | 163.3 | 10-K PDF p.71, 107, 76 |
| Jul 2025 | 116.04M | -3.4% | -3.4% | 333.6 | 10-K PDF p.71, 107, 76 |
| Jul 2026 | 115.99M | -0.0% | -3.4% | 108.5 | 10-K PDF p.71, 107, 76 |
Beneficial ownership — 2026 proxy statement (DEF 14A), record date September 21, 2026
| Holder | Shares | % out. | As of | Source |
|---|---|---|---|---|
| All directors and executive officers as a group (15 persons) | 2,627,045 | 2.20% | September 21, 2026 | DEF 14A p.15 and 17 |
| Named insider: Tod E. Carpenter | 1,677,448 | 1.40% | September 21, 2026 | DEF 14A p.15 and 17 |
| BlackRock, Inc. | 10,954,890 | 9.50% | filing January 24, 2024 | DEF 14A p.15 and 17, fn.1 (Schedule 13G/A filed January 24, 2024) |
| State Farm Mutual Automobile Insurance | 9,600,103 | 8.30% | filing February 12, 2024 | DEF 14A p.15 and 17, fn.2 (Schedule 13G/A filed February 12, 2024) |
| Vanguard Portfolio Management | 6,535,093 | 5.60% | filing April 29, 2026 | DEF 14A p.15 and 17, fn.3 (Schedule 13G filed April 29, 2026) |
| Vanguard Capital Management | 6,064,424 | 5.20% | filing April 29, 2026 | DEF 14A p.15 and 17, fn.4 (Schedule 13G filed April 29, 2026) |
Individual percentages may overlap through shared voting authority; do not add them.
Later SEC filings (after the proxy record date)
| Holder | Shares | % out. | As of | Source |
|---|---|---|---|---|
| The Vanguard Group (post Jan 12, 2026 realignment) | 0 | 0.00% | event 03/13/2026, filed 03/26/2026 | Schedule 13G/A Amendment No. 14, sec.gov (as supplied) |
The Vanguard Group (post Jan 12, 2026 realignment) now reports zero; holdings are reported separately by Vanguard Portfolio Management and Vanguard Capital Management above.
Concentration: no controlling block; the 5%+ holders listed total 28.6% of shares; remainder 71.4%. Our arithmetic as of the proxy record date: the sum of the 5%+ holders' percentages in the proxy table. Later Schedule 13G filings (listed separately) may have changed individual holders.
Data scope & exclusions
- BlackRock (Schedule 13G/A dated January 24, 2024) and State Farm (Schedule 13G/A signed February 7, 2024; the proxy gives February 12, 2024 as the filing date) are more than two years old. NovaRock reports that no later filing exists on EDGAR, and both filings were cross-checked to the proxy share counts.
- The proxy expresses the holdings against the record-date share count of 115,820,533, which is why its percentages are higher than the percentages in the older Schedule 13G/A filings.
- The Vanguard Group Schedule 13G/A (Amendment No. 14, event date March 13, 2026, filed March 26, 2026) shows zero after its January 12, 2026 realignment; the holdings are now reported separately by Vanguard Portfolio Management and Vanguard Capital Management, listed above.
- Form 4 insider trades were not collected.
Multi-year trend & financial summary
| Metric | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Net sales | $3,586.3M | $3,690.9M | $3,885.6M |
| Net income | $414.0M | $367.0M | $453.8M |
| Free cash flow | $406.9M | $339.9M | $426.3M |
Financial summary (most recent year)
| Line item | Value | Source |
|---|---|---|
| Net sales | $3,885.6M | 10-K PDF p.40 |
| Operating income | $599.9M | 10-K PDF p.40 |
| Net earnings | $453.8M | 10-K PDF p.73 |
| Diluted EPS | $3.85 | 10-K PDF p.40 |
| Operating cash flow | $493.7M | 10-K PDF p.73 |
| Capital expenditures | $67.4M | 10-K PDF p.73 |
| Free cash flow (OCF less capex) | $426.3M | computed |
| Dividends paid | $141.2M | 10-K PDF p.73 |
| Treasury stock purchased (cash) | $111.2M | 10-K PDF p.73 |
| Cash and equivalents | $250.4M | 10-K PDF p.71 |
| Total debt (short-term + long-term) | $1,324.8M | 10-K PDF p.71 |
| Total stockholders' equity | $1,764.4M | 10-K PDF p.71 |
Valuation sensitivity — fair value per share ($)
Rows: discount rate. Columns: terminal growth rate. Base case (8.5% / 3.0%) outlined in gold. The $87.56 price sits inside the range, which is why the rating is HOLD.
| Discount rate | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|
| 7.5% | $95 | $101 | $109 | $118 |
| 8.5% | $80 | $84 | $89 | $94 |
| 9.5% | $69 | $72 | $75 | $79 |
| 10.5% | $61 | $62 | $65 | $67 |
Methodology & limitations
- Comps-based relative valuation included above - see Comparable Companies Cross-Check.
- Fair value is highly sensitive to the discount rate / terminal growth pair (see grid above).
- Fair value is an intrinsic-value estimate as of the report date, not a 12-month price target.
- Free cash flow is operating cash flow less capital expenditure; it is not adjusted for stock-based compensation, and per-share values use period-end shares outstanding, not fully diluted shares.
- Data scope & exclusions: (1) peer share prices (October 12, 2026) were supplied by NovaRock and are not filing-verified, while peer EPS and share counts come from each peer's own filings; Pentair's price of $52.53 is back-solved from the supplied 13.5x P/E, and its EV/EBITDA uses the Q2-2026 diluted weighted average share count of 161.6M (no period-end count was in the release) and net debt of long-term debt $1,606.0M less cash $91.8M at June 30, 2026 (no short-term borrowings line is reported); (2) the ten-year growth path is NovaRock's own judgment; (3) FY2027 guidance is taken from the August 26, 2026 earnings release (Form 8-K, accession 0000029644-26-000071); no earnings-call transcript was supplied, so no analyst Q&A is cited; (4) the BlackRock and State Farm holdings rest on Schedule 13G/A filings from early 2024, and no later filing was found on EDGAR (per NovaRock), so they may have changed since; (5) Form 4 insider trades were not collected.
- This note reflects NovaRock's structured multi-stage analytical process (Analyst, Risk Review, Final Edit) and was reviewed and approved by Jasvinder Singh, Founder and Principal Analyst, on 2026-10-13.
Disclosures
Full disclosures, methodology notes, and conflicts-of-interest policy are maintained on novarockcorp.com's legal pages and apply to this note. Drafting of this note used AI-assisted research tools. This report has been reviewed, finalized, and approved by Jasvinder Singh, Founder and Principal Analyst, on 2026-10-13.
NovaRock Global Research is an independent publisher. This note is for informational purposes only and is not personalized investment advice or an offer to buy or sell any security. It is not marketed or offered to residents of India. See the research disclaimer.