$22.50
$66.40
bear $22.50
base $43.60
bull $66.40
margin of safety $27.00
market price* $71.15
Ashland is a maker of specialty additives and ingredients that go into pharmaceuticals, food, personal care products, paints and coatings, and construction materials. It reports four segments. In fiscal 2025 (year ended September 30, 2025) sales were $1,824 million: Life Sciences $641 million, Personal Care $577 million, Specialty Additives $511 million and Intermediates $137 million, less $42 million of sales between segments. Roughly 73% of sales are outside the United States and Canada. What we measure. We value the business on "owner earnings": cash from operations, minus the swings in working capital (receivables, inventory, payables), minus stock compensation, minus the part of capital spending needed just to stand still. Ashland is a lumpy earner on this basis. Per share, owner earnings were $1.13 (fiscal 2016), $0.10, $0.78, $1.79, $1.16, $4.46 (2021), $5.66 (2022), $2.96 (2023), $1.66 (2024) and $4.63 (2025). Total owner earnings were about $272 million in 2021, $317 million in 2022, $160 million in 2023, $83 million in 2024 and $213 million in 2025. The level we use. We anchor on $150 million a year, about $3.26 per share on 46 million shares. That is below the $186 million middle of the last six years (fiscal 2020 to 2025) because 2021 and 2022 were the two highest years and every later year was lower, and because the company has since sold businesses. It is close to the $160 million middle of the last three years. Ashland sold its Nutraceuticals business in August 2024 and its Avoca business in March 2025, and the company says its portfolio optimization actions, which include these sales, reduced fiscal 2025 sales by about $208 million. The nine months to June 2026 support a level below fiscal 2025: owner earnings were about $95 million against about $125 million in the same nine months a year earlier, even though sales edged up to $1,365 million from $1,347 million. Trailing owner earnings grew about 157% in fiscal 2025, but that was a rebound from a weak 2024; we assume no growth from the anchor in year one of the base case, so there is no assumed acceleration to explain. Accounting judgements. We use cash from continuing operations. In fiscal 2025 the company took $706 million of goodwill write-downs (Life Sciences $375 million, Specialty Additives $331 million). These are non-cash, so they do not reduce owner earnings, but they indicate that two of the businesses are worth less than the amounts at which they were carried; Specialty Additives lost $338 million at the operating level in 2025, or about $7 million excluding the write-down. Ashland also carries $63 million a year of amortization of acquired intangibles. We do not adjust the earnings level for that; instead the decline is reflected in the fade after year ten and in the bear case. Capital spending fell to $98 million in 2025 from $137 million and $170 million in the two prior years, so the anchor rests on the three-year record rather than on the lowest year. Ashland also carries asbestos and environmental legacy liabilities: reserves for asbestos claims were $258 million (Ashland) and $177 million (Hercules) at September 30, 2025, against insurance receivables of $95 million and $48 million and $347 million held in restricted trusts for asbestos and environmental costs. Cash used by discontinued operations was $40 million, $51 million and $51 million in fiscal 2025, 2024 and 2023, while reimbursements from the trusts were $62 million, $79 million and $58 million, so we made no separate deduction. Debt is $1,419 million in principal; interest paid ($54 million in 2025) is already inside cash from operations, so no debt is subtracted again. Growth. We credit none. Sales fell from $2,391 million in fiscal 2022 to $1,824 million in 2025 partly because of the divestitures, price and mix was negative in Life Sciences in both 2025 (down $21 million) and 2024 (down $14 million), and no repeatable, self-funded expansion pattern is in evidence. Buybacks (diluted shares fell from 54 million in 2023 to about 46 million in 2025) raise per-share results but we do not count future buybacks. Market recovery, new products and margin improvement are left out. Base case, $43.6 per share. Owner earnings hold flat at $150 million for ten years, then decline 3% a year. The steadiness rests on a record: owner earnings were positive in each of the ten years we measured, and sales stayed between $1.8 billion and $2.4 billion from fiscal 2019 to 2025. The 3% fade reflects the wasting acquired intangibles and the pattern of price erosion. Bear case, $22.5 per share. Owner earnings fall back to about $85 million, the level of fiscal 2024 ($83 million), stay flat for ten years and then decline 5% a year. This reflects the disclosed pressure on prices and volumes in Life Sciences, continued losses in Specialty Additives, the record of impairments, and $1.4 billion of debt that leaves less room to absorb weak years. Bull case, $66.4 per share. Owner earnings return to about $215 million, the fiscal 2025 result, hold flat for ten years and then decline 2% a year. No growth is credited; this is simply the recently demonstrated level sustained. What would make this wrong. If the weaker nine months to June 2026 turn out to be the start of a lower run rate, the base case is too high. If capital spending must return to its $137 million to $170 million range of 2023 and 2024, owner earnings would be lower. On the other side, if fiscal 2025's $213 million proves typical, value is nearer the bull case. Asbestos and environmental claims could exceed the reserves and trusts. The nine-month figures come from reported quarterly data; we did not have the text of the latest quarterly report to check the reasons behind them. Margin-of-safety price. The margin-of-safety price is $27 a share: about 38% below the base case, reflecting an earnings record that has swung widely, past impairments and debt, and only about $4.5 above the bear case.