# Pentair (PNR) Financial Model Free Excel 3-statement financial model and company analysis for Pentair. - Canonical: https://finamodel.com/companies/pentair - Industry: Industrial Equipment - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/PNR.xlsx ## Model Purpose This model provides a comprehensive three-statement forecast and discounted cash flow valuation for Pentair plc to help equity analysts assess the impact of its ongoing transformation programme and margin expansion targets on its intrinsic value. ## Company Overview Pentair plc is a global water treatment and sustainable fluid management company that provides solutions for residential, commercial, and industrial applications. - **Pool (approx. 35-40% of revenue):** Energy-efficient pool equipment and accessories. - **Flow (approx. 35-40% of revenue):** Fluid treatment and pump products for residential, commercial, and industrial use. - **Water Solutions (approx. 20-25% of revenue):** Commercial and residential water treatment products and filtration systems. The United States is the primary market, with international sales accounting for approximately 31% of total revenue. The company operates an asset-light manufacturing and assembly business model, with a strong focus on value-based pricing and 80/20 operational efficiency initiatives. Pentair is a market leader in pool equipment and water filtration, competing with companies like Hayward Holdings, Xylem, and Franklin Electric. Recent major events include a strategic realignment of business segments, the acquisition of G & F Manufacturing in 2024 for $116 million, and a multi-year Transformation Programme driving significant return on sales margin expansion. ## Revenue Deep Dive ### Pool - **Segment name:** Pool - **Revenue driver formula:** Installed Base x Replacement Rate x Average Selling Price + New Pool Construction Volume x Equipment Content per Pool - **Historical growth rate:** 7% in 2024 and 9% in 2025. - **Key growth levers and headwinds:** Weather conditions, housing market dynamics, consumer discretionary spending, and the regulatory shift towards energy-efficient variable speed pumps. - **Pricing dynamics:** Strong pricing power driven by brand loyalty and regulatory shifts requiring energy-efficient equipment. - **Revenue recognition notes:** Recognised at a point in time upon shipment of equipment to distributors. - **Seasonality:** Strongest in the second and third quarters due to the Northern Hemisphere pool building and opening season. ### Flow - **Segment name:** Flow - **Revenue driver formula:** Volume (Residential/Irrigation + Commercial/Infrastructure + Industrial) x Average Selling Price - **Historical growth rate:** Declined 4% in 2024, grew 3% in 2025. - **Key growth levers and headwinds:** Agricultural demand, infrastructure spending, industrial capital expenditure, and foreign currency translation. - **Pricing dynamics:** Value-based pricing initiatives have successfully offset inflation. - **Revenue recognition notes:** Primarily point-in-time recognition upon delivery. - **Seasonality:** Mild seasonality, with slightly higher agricultural pump demand in the spring. ### Water Solutions - **Segment name:** Water Solutions - **Revenue driver formula:** Commercial Filtration Volume x Price + Residential Filtration Volume x Price - **Historical growth rate:** Declined 3% in 2025. - **Key growth levers and headwinds:** Commercial foodservice recovery, residential water quality awareness, and replacement filter recurring revenue. - **Pricing dynamics:** Highly competitive residential market, but strong contractual pricing in commercial foodservice. - **Revenue recognition notes:** Point-in-time for equipment and consumables. - **Seasonality:** Relatively stable throughout the year. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown:** Raw materials (metals, resins, motors), direct labour, manufacturing overhead, and inbound freight. - **Gross margin range:** 35% to 40.5% (expanding recently due to pricing and productivity). - **Key input costs:** Copper, steel, plastics, and electronic components. - **Scaling:** Step-function scaling with manufacturing capacity, benefiting heavily from 80/20 rationalisation. ### Operating Expenses - **R&D:** Typically 2% to 3% of revenue, expensed as incurred, covering new product development and energy-efficiency engineering. - **SG&A:** Typically 15% to 18% of revenue, heavily headcount-driven, including sales commissions, marketing, and corporate overhead. - **Depreciation & Amortisation:** Approximately 2% to 3% of revenue, split evenly between tangible manufacturing assets and acquired intangibles. - **Stock-Based Compensation:** Approximately 1% of revenue. - **Restructuring:** Frequent charges related to the Transformation Programme (targeting $70 million to $80 million in net savings). ### Margin Profile - **Gross margin:** 35% to 40.5%. - **EBITDA margin:** 20% to 26%. - **Operating margin:** 19% to 25% (Adjusted Return on Sales reached 25.2% in 2025). - **Net margin:** 12% to 16%. - **Margin trend:** Expanding rapidly due to the Transformation Programme and value-based pricing. ## Balance Sheet Structure - **Total assets:** Approximately $5.0 billion to $5.5 billion. - **Key asset categories:** Inventory, accounts receivable, property, plant and equipment, and a large goodwill balance from historical acquisitions. - **Goodwill & intangibles:** Typically 50% to 60% of total assets, reflecting a history of bolt-on acquisitions. - **Working capital profile:** - **Days Sales Outstanding (DSO):** 40 to 50 days. - **Days Inventory Outstanding (DIO):** 60 to 80 days. - **Days Payable Outstanding (DPO):** 50 to 65 days. - **Net working capital as % of revenue:** 10% to 15%. - Working capital is positive, requiring investment as the business grows. - **PP&E:** Approximately 10% of total assets, reflecting an asset-light assembly model. - **Right-of-use assets:** Material but manageable, representing leased warehouse and assembly facilities. ## Capital Expenditure & Investment - **Capex as % of revenue:** 1.5% to 2.5%. - **Maintenance vs. growth:** 60% maintenance, 40% growth (automation and facility upgrades). - **Major programmes:** Investments in manufacturing automation and digital transformation. - **Capitalised software:** Minimal relative to total capex. - **M&A pattern:** Consistent bolt-on acquirer (e.g., G & F Manufacturing for $116 million in 2024). ## Debt & Capital Structure - **Total debt:** Approximately $1.5 billion to $2.0 billion. - **Debt/EBITDA ratio:** 1.5x to 2.5x. - **Credit rating:** Investment grade. - **Key debt instruments:** Senior unsecured notes and a revolving credit facility. - **Maturity profile:** Staggered maturities over the next 5 to 10 years. - **Interest rate profile:** Predominantly fixed-rate bonds with some floating-rate bank debt. - **Covenants:** Standard leverage and interest coverage ratios. - **Share repurchases:** Active programme ($225 million repurchased in 2025). - **Dividend policy:** Dividend Aristocrat/King, 50th consecutive year of increases in 2026, payout ratio around 20% to 25%. ## Cash Flow Characteristics - **Operating cash flow conversion:** >100% of net income ($815 million OCF in 2025 vs $654 million net income). - **Free cash flow margin:** 15% to 18% ($748 million FCF on $4.176 billion revenue in 2025). - **Major non-cash items:** Depreciation, amortisation of intangibles, and stock-based compensation. - **Working capital impact:** Seasonal build in Q1/Q2, release in Q3/Q4. - **Capex intensity:** Very low, driving high free cash flow conversion. - **Cash tax rate:** 15% to 18%, benefiting from the Irish tax domicile. ## Sheet Structure 1. **Assumptions**: Hardcoded drivers for macroeconomic inputs, segment growth, margins, and capital allocation. 2. **Revenue_Build**: Segment-level volume and pricing drivers for Pool, Flow, and Water Solutions. 3. **Income_Statement**: GAAP and Adjusted views, linking revenue, COGS, SG&A, restructuring, and interest. 4. **Balance_Sheet**: Assets, liabilities, and equity, driven by working capital schedules and debt. 5. **Cash_Flow**: Indirect method, starting from net income, adjusting for non-cash items, working capital changes, capex, and financing. 6. **Working_Capital**: Schedules for accounts receivable, inventory, and accounts payable based on days outstanding. 7. **Depreciation_Amortisation**: PP&E rollforward and intangible asset amortisation schedules. 8. **Debt_Schedule**: Tranche-by-tranche debt rollforward, interest expense calculation, and mandatory repayments. 9. **Shareholders_Equity**: Share count rollforward, buybacks, dividends, and retained earnings. 10. **DCF_Valuation**: Unlevered free cash flow calculation, WACC build, terminal value, and implied share price. ## Key Financial Relationships 1. Pool Revenue = Prior Year Pool Revenue x (1 + Pool Volume Growth + Pool Price Growth) 2. Flow Revenue = Prior Year Flow Revenue x (1 + Flow Volume Growth + Flow Price Growth) 3. Water Solutions Revenue = Prior Year Water Solutions Revenue x (1 + Water Solutions Volume Growth + Water Solutions Price Growth) 4. Total Net Sales = Pool Revenue + Flow Revenue + Water Solutions Revenue 5. Segment Income = Segment Revenue x Segment Return on Sales Margin 6. Total Segment Income = Pool Segment Income + Flow Segment Income + Water Solutions Segment Income 7. Adjusted Operating Income = Total Segment Income - Corporate Expenses 8. GAAP Operating Income = Adjusted Operating Income - Restructuring Charges - Intangible Amortisation 9. Accounts Receivable = (Total Net Sales / 365) x Days Sales Outstanding 10. Inventory = (Cost of Goods Sold / 365) x Days Inventory Outstanding 11. Accounts Payable = (Cost of Goods Sold / 365) x Days Payable Outstanding 12. Interest Expense = Average Debt Balance x Weighted Average Interest Rate 13. Free Cash Flow = Net Cash Provided by Operating Activities - Capital Expenditures 14. Dividends Paid = Shares Outstanding x Annual Dividend per Share 15. Ending Shares Outstanding = Beginning Shares Outstanding - (Share Repurchase Amount / Average Share Price) ## Cross-Sheet Dependencies - **Assumptions** feeds all other sheets with growth rates, margin targets, and days outstanding metrics. - **Revenue_Build** feeds the top line of the **Income_Statement** and the denominator for DSO in **Working_Capital**. - **Income_Statement** generates Net Income, which feeds the top of the **Cash_Flow** statement and Retained Earnings in **Shareholders_Equity**. - **Working_Capital** calculates changes in operating assets and liabilities, feeding the **Cash_Flow** statement. - **Debt_Schedule** calculates interest expense for the **Income_Statement** and ending debt balances for the **Balance_Sheet**. This creates a circular reference if interest expense reduces cash, which increases debt, which increases interest expense. A toggle switch is required to break the circularity. - **Cash_Flow** generates the ending cash balance, which feeds the **Balance_Sheet**. ## Sign Convention - Revenue and income items are positive. - Expenses (COGS, SG&A, Interest, Taxes) are entered as positive numbers and subtracted in formulas. - Assets are positive; Liabilities and Equity are positive. - On the Cash Flow statement, cash inflows are positive, and cash outflows (e.g., capex, dividends, debt repayment) are negative. - Contra-asset accounts (e.g., accumulated depreciation) are positive and subtracted from gross assets. ## Things Most Likely to Go Wrong - The company reports "Return on Sales" which is equivalent to segment operating margin; confusing this with gross margin will break profitability forecasts. - Restructuring and Transformation Programme costs are excluded from Adjusted Operating Income but represent real cash outflows that must be captured in the cash flow statement. - Pentair is domiciled in Ireland, resulting in a structurally lower effective tax rate than US-domiciled peers; applying a standard US statutory rate will severely undervalue the company. - The Pool segment is highly seasonal, with Q2 and Q3 generating the bulk of revenue and cash flow; quarterly models must incorporate this seasonality to avoid cash shortfalls in Q1. - Foreign currency translation can swing reported revenue by 2% to 4% year-over-year; the model should ideally separate core growth from FX impacts. - The company frequently engages in bolt-on M&A; failing to model acquired intangibles amortisation will cause a disconnect between GAAP and Adjusted EPS. - Share repurchases are a major component of capital allocation; the model must dynamically reduce the share count to accurately forecast EPS. - The Flow segment contains diverse end markets (residential, commercial, industrial) with different cyclicality; treating it as a single homogenous growth driver will miss macroeconomic nuances. ## Validation Checks - Total Assets must equal Total Liabilities plus Shareholders' Equity in every period. - Adjusted Return on Sales should trend towards management's target of 26% by 2026; flag if it exceeds 28% or drops below 20%. - Free Cash Flow conversion (FCF / Net Income) should remain above 100% due to low capital intensity. - Capex as a percentage of revenue should remain between 1.5% and 2.5%. - The effective tax rate should remain in the 15% to 18% range. - Debt to EBITDA should not exceed 3.0x to maintain the investment-grade credit rating. - The dividend payout ratio should remain between 20% and 30% of net income. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Pool Revenue Growth | 5.0 | % | Normalised growth following 2024/2025 recovery | | Flow Revenue Growth | 2.0 | % | Stable growth in line with industrial and infrastructure trends | | Water Solutions Revenue Growth | 1.0 | % | Modest growth reflecting competitive residential markets | | Pool Return on Sales | 33.8 | % | Based on 2025 actual segment margin | | Flow Return on Sales | 22.8 | % | Based on 2025 actual segment margin | | Water Solutions Return on Sales | 23.5 | % | Based on recent historical averages | | Corporate Expenses | 2.5 | % of Rev | Historical run-rate for unallocated corporate costs | | Days Sales Outstanding | 45 | Days | Based on historical receivables turnover | | Days Inventory Outstanding | 70 | Days | Based on historical inventory turnover | | Days Payable Outstanding | 60 | Days | Based on historical payables turnover | | Capex as % of Revenue | 2.0 | % | Asset-light manufacturing model | | Effective Tax Rate | 16.9 | % | Based on 2025 actual adjusted tax rate | | Annual Dividend per Share | 1.08 | $ | Based on 2026 quarterly run-rate of $0.27 | | Share Repurchases | 225 | $M | Consistent with 2025 actual capital return | | Weighted Average Interest Rate | 4.5 | % | Blended rate on existing senior notes and credit facility | | WACC | 8.5 | % | Standard discount rate for industrial machinery peers | | Terminal Growth Rate | 2.5 | % | Long-term GDP and inflation expectations | ## Data Sources & Benchmarks - SEC EDGAR for 10-K and 10-Q filings. - Pentair Investor Relations website for earnings presentations and Transformation Programme updates. - Key peers for benchmarking: Xylem (XYL), Franklin Electric (FELE), Hayward Holdings (HAYW), and A. O. Smith (AOS). - Industry data sources: US housing starts, pool permit data, and industrial production indices. - Consensus estimates: FactSet or Bloomberg for near-term revenue and EPS estimates. ## Sources - Pentair plc 2025 Form 10-K and Q4 2025 Earnings Release - Pentair Investor Relations Presentations and Transcripts - SEC EDGAR Database --- ## Frequently asked questions ### What does Pentair plc do? Pentair plc is a global water treatment and sustainable fluid management company. It provides solutions for residential, commercial, and industrial applications across its Pool, Flow, and Water Solutions segments. The company is a market leader in pool equipment and water filtration. ### How does Pentair generate its revenue? Pentair generates revenue primarily through the sale of energy-efficient pool equipment, fluid treatment and pump products, and commercial and residential water treatment and filtration systems. Its Pool and Flow segments each contribute approximately 35-40% of total revenue, with Water Solutions making up the remaining 20-25%. The United States is its primary market, supplemented by international sales. ### What revenue growth rate is assumed in the Pentair financial model? The financial model for Pentair assumes a revenue growth rate of approximately 8.54% for its forecast horizon from FY2026 to FY2030. This assumption helps project the company's future top-line performance, reflecting its ongoing transformation program and market position. ### What is the main purpose of the Pentair financial model? The Pentair financial model aims to provide a comprehensive three-statement forecast and discounted cash flow valuation. This helps equity analysts assess the impact of Pentair's ongoing transformation program and margin expansion targets on its intrinsic value. ### Can I download an Excel financial model for Pentair? Yes, an Excel financial model for Pentair is available for download. This model offers a detailed three-statement forecast and discounted cash flow valuation, covering a forecast horizon from FY2026 to FY2030. ### How does Pentair manage its capital expenditures? Pentair maintains an asset-light manufacturing and assembly business model, reflected in its capital expenditure as a percentage of revenue, which typically ranges from 1.5% to 2.5%. Approximately 60% of this capex is for maintenance, while 40% is allocated to growth initiatives like manufacturing automation and facility upgrades. [Interactive forecast calculator](https://finamodel.com/companies/pentair/forecast)