Trane Technologies plc (TT)

Conclusion

Trane Technologies designs, manufactures and services heating, ventilation, air conditioning and refrigeration systems for buildings and transport. At 420.56 USD on 9 November 2026, the shares give a market capitalisation of 92.1 billion USD and an enterprise value of 95.0 billion USD.

The verdict is overvalued. Today's P/E of 29.2 is above its ten-year median of 25.6, and EV/EBITDA of 21.4 is above its median of 17.3. The DCF gives 339.79 USD per share, and the fair value from historical multiples is 338.20 USD. The fair value band runs from 271.20 to 406.79 USD with a midpoint of 339.00 USD, giving a margin of safety of -19.4% at the current price. The reverse DCF implies growth of 12.1% a year, against revenue growth of 11.4% a year over five years and free cash flow per share growth of 18.9% a year over five years.

The strongest supports are the balance sheet and returns: an Altman Z-score of 5.98, net debt to EBITDA of 0.67, and ROIC of 27.6% against a WACC of 10.6%. The weakest numbers are the price multiples: P/B of 10.08 against a ten-year median of 5.79, and P/S of 3.96 against a median of 2.69. The current ratio of 1.12 is rated neutral, and the price already sits above the top of the fair value band.

Financial health

Financial strength is green, held up by the Altman Z-score, net debt to EBITDA and interest coverage, with only the current ratio rated neutral. The current ratio is 1.12 and the quick ratio is 0.69, so near-term liquidity depends on inventory and receivables. Debt to equity is 0.46 and interest coverage is 19.1 on a trailing basis. The Altman Z-score is 5.98, in the safe zone; the Altman model was designed for manufacturers, which Trane is. Insolvency risk: low, about 0.4% by the estimate of the Ohlson model over one to two years, based on figures as of 31 December 2025. Debt has fallen by 14.0% a year over five years, measured on revenue growth.

Earnings quality

Earnings quality is green, with the Piotroski score of 9 out of 9 and free cash flow conversion of 1.21 on a trailing basis and 0.96 over five years. The accrual ratio is -0.0133, which means cash earnings exceed reported earnings. Stock-based compensation is 0.2% of revenue, and free cash flow after it is 3.77 billion USD. The share count fell at a compound rate of 1.7% a year over five years, which points to buybacks. The Beneish M-score is not available. The company beat earnings estimates in all eight of the last eight quarters, with an average surprise of 3.5%. Estimates for next year have been revised up 8 times and down once in the last 30 days.

Profitability

Profitability is green, with ROIC of 27.6% against a WACC of 10.6%, giving a ROIC minus WACC value of 17.1 percentage points. ROIC is above its five-year median of 21.2%. The gross margin is 35.0% against a ten-year median of 31.1%, and the operating margin is 17.9% against 13.5%. The net margin is 13.6% against 10.9%, and operating margin stability is 16.8%. Return on equity is 34.5%, but the DuPont split shows that part of it comes from leverage: an asset turnover of 1.00 and an equity multiplier of 2.49. Net margin of 13.7% is the main driver, so returns rest on operations more than on debt.

Growth

Growth is green. Revenue compounds at 10.1% over three years, 11.4% over five and 4.8% over ten. Earnings per share compound at 20.4% over three years, 30.0% over five and 18.1% over ten. Free cash flow per share compounds at 34.6% over three years, 18.9% over five and 18.1% over ten. Revenue grew in 8 of the last 10 years. Analysts expect next year's earnings per share to grow 15.9%, with the estimate up 1.6% over the last 90 days.

Valuation

Valuation is red. Current multiples are above their ten-year medians on four of five measures: P/E 29.2 against 25.6 (a premium of 14.1%), EV/EBITDA 21.4 against 17.3 (23.4%), P/S 3.96 against 2.69 (47.3%) and P/B 10.08 against 5.79 (74.2%). P/FCF of 24.1 is below its median of 27.7, a discount of 12.8%. The DCF gives 339.79 USD per share, using a discount rate of 10.9%, a five-year growth rate of 11.4% and terminal growth of 2.5%. Terminal value makes up 50.8% of the DCF. The fair value band is built on fixed assumptions, including a 5% equity risk premium and capped growth; it is not a price target. The dividend yield is 0.98% and the payout on free cash flow is 23.6%.

Risks

The main risk is valuation: the price of 420.56 USD is above the top of the fair value band of 406.79 USD, and a P/B of 10.08 leaves little room for a slowdown in growth. A fall in free cash flow would shrink the 18.9% five-year per-share growth that supports the DCF. A current ratio of 1.12 and a quick ratio of 0.69 leave limited cushion if working capital tightens. The Beneish M-score and the debt maturity schedule are not available. This analysis does not cover revenue by segment, so it cannot show which part of the business drives growth or margins.