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Regal Rexnord Corporation (RRX) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Regal Rexnord Corporation (RRX)

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Intrinsic Value (DCF)

Current$158.16
→
Intrinsic$90.38
-43%
$36.90$90.38$192.00
Market implies 22% growth for 5 years
Current price reflects execution expectations above 13% growth — not unreasonable for quality businesses.
At $158, the market prices in continued strong cash flow growth (22%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $37 → Bull $192. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →9%11%13%15%
8%$124$142$161$181
10%$65$77$90$104
12%$32$42$51$62
14%$12$19$27$35

Bull Case

  • Bull case ($192) offers 21% upside at 16% growth, 9% discount
  • Conservative 13% growth assumption is achievable based on track record

Bear Case

  • Bear case ($37) implies 77% downside at 11% growth, 12% discount
  • Price reflects 22% growth expectations vs 13% historical — high bar to clear
  • Trading 43% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$566.18M
Year 2$641.25M
Year 3$726.27M
Year 4$822.56M
Year 5$931.62M
Terminal$13.71B

📐 Model Inputs

Growth Rate13.3%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$499.90MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is RRX stock undervalued or overvalued?
🔴 OVERVALUED

RRX trades at $158.16 vs. our DCF-derived intrinsic value of $90.38, implying -43% downside. Using a 10.0% WACC and 13.3% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($163.01) suggests limited upside.

What is RRX's intrinsic value?

Using a 5-year DCF model: Base FCF of $500M, projected at 13.3% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $5.21B net debt and dividing by 0.07B shares: Bear $38.50 | Base $90.38 | Bull $163.01. Current price $158.16 implies -43% to base case.

How is RRX's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 13.3% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($11.24B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 22.5x.