Is Trane Technologies Still Attractive After Its Huge Multi Year Share Price Rally?
- If you are wondering whether Trane Technologies is still worth buying at today’s price, you are not alone. This article will walk through what the current share price actually implies about its value.
- After a huge multiyear run, the stock has cooled slightly, with the share price down around 1.3% over the last week and 4.9% over the past month, but still up 4.3% year to date and 137.6% over three years.
- That kind of performance has been supported by growing enthusiasm for energy efficient heating, ventilation, and air conditioning solutions, as Trane focuses on global decarbonization and building efficiency trends. Investors have also responded to its strategic focus on high margin climate technologies and sustainability linked offerings, which helps explain why the market has been willing to re-rate the stock.
- On our framework, Trane Technologies scores a 3/6 on valuation checks, indicating that it screens as undervalued on three of the six metrics we track. You can see the breakdown in this valuation score. Next, we will unpack how different valuation approaches line up for Trane, and later in the article we will look at a more holistic way to think about what the market is really pricing in.
Approach 1: Trane Technologies Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a business is worth by projecting its future cash flows and then discounting those cash flows back to today, using a required rate of return.
For Trane Technologies, the latest twelve month Free Cash Flow stands at about $2.56 billion. Analysts and internal estimates see this rising steadily, with projections reaching roughly $5.33 billion in 2035. The nearer term outlook includes forecast Free Cash Flow of around $3.21 billion in 2026 and $3.86 billion by 2028, before Simply Wall St extrapolates growth further into the next decade.
When all of these future cash flows are discounted back to today using a 2 Stage Free Cash Flow to Equity approach, the resulting intrinsic value comes out at about $304.72 per share. Compared with the current share price, this implies the stock is around 27.9% overvalued on a DCF basis, suggesting expectations embedded in the market price are already quite optimistic.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Trane Technologies may be overvalued by 27.9%. Discover 898 undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Trane Technologies Price vs Earnings
For profitable companies like Trane Technologies, the price to earnings, or PE, ratio is a useful way to gauge whether investors are paying a reasonable price for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher uncertainty usually call for a lower, more conservative multiple.
Trane currently trades on a PE of about 29.3x. That is well above the broader Building industry average of roughly 19.4x, indicating the market is assigning a premium to Trane’s earnings, but it is almost identical to the peer group average of around 29.3x, suggesting its valuation is in line with similar companies.
Simply Wall St’s Fair Ratio for Trane comes in slightly higher at about 30.3x. This proprietary metric estimates the PE you would expect given the company’s earnings growth outlook, profitability, industry positioning, size, and key risks. Because it blends these fundamentals, it can be more informative than a simple comparison with peers or the industry, which often ignores differences in quality or risk. With the Fair Ratio only marginally above the current PE, the stock appears to be trading close to its fundamental value on this metric.
Result: ABOUT RIGHT
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1458 companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Trane Technologies Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of a company with the numbers by writing a short story about its future and then tying that story to your own forecasts for revenue, earnings, margins, and Fair Value.
On Simply Wall St’s Community page, used by millions of investors, Narratives act as an accessible tool that links a company’s business story to a financial model and then to a Fair Value estimate, helping you decide whether to buy, hold, or sell by comparing that Fair Value to the current share price.
Narratives update dynamically when new information like earnings, guidance, or major news breaks, so your Fair Value and supporting assumptions stay aligned with what is actually happening in the business rather than going stale.
For Trane Technologies, for example, one investor might build a bullish Narrative around AI enabled building efficiency, data center cooling demand, and rising margins to justify a Fair Value closer to the top end of recent targets near $544. A more cautious investor might instead emphasize risks in transport markets, tariffs, and macro headwinds to arrive at a far lower Fair Value closer to $265.
Do you think there's more to the story for Trane Technologies? Head over to our Community to see what others are saying!
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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