CSW INDUSTRIALS, INC. (CSW) stock intrinsic value fair value estimate & owner earnings analysis

CSW Industrials makes niche, brand-name products, mostly for HVAC/R and plumbing contractors who ask for them by name (RectorSeal, Goliath, Dust Free, PSP Products, and since this year Aspen evaporator coils and MARS motors and capacitors), plus specialty lubricants for mining, rail and energy customers and architecturally-specified building products. What changed: in the year ended March 2026 the company spent $1.02 billion in cash on acquisitions, chiefly Aspen Manufacturing (May 1, 2025, $327.6 million) and MARS Parts (November 4, 2025, $658.1 million). A year earlier it had no debt; it now owes $871.5 million ($592.5 million term loan at 5.29% and $279 million revolver at 5.42%), with $751.5 million falling due in fiscal 2031. This is a different, larger and more leveraged business than the one in older filings, so we measure it from this year. Owner earnings (cash from operations, adding back working-capital swings, less stock compensation and maintenance capital spending) per diluted share: FY2020 $3.65, FY2021 $3.61, FY2022 $5.87, FY2023 $7.65, FY2024 $8.08, FY2025 $10.14, FY2026 $11.07 (about $185 million in total). Years before FY2020 are not used because discontinued operations distort them. We anchor on FY2026 because it is the only year that includes the new acquisitions and the new debt. It is an imperfect anchor: cash interest paid was $20.9 million, versus roughly $46 million a year at current rates on the debt now outstanding, while MARS was owned for only about five months (it contributed $60.1 million of revenue and $3.9 million of pre-tax income after integration costs). Those two effects pull in opposite directions and we have not tried to net them by hand. One encouraging data point: in April-June 2026, revenue was $350.7 million versus $263.6 million a year earlier and our estimate of owner earnings per share was roughly $4.2 versus $3.1. One quarter is not enough to raise the level, so it only informs the bull case. Growth check: owner earnings per share grew 9.2% in FY2026 ($10.14 to $11.07), almost entirely from acquisitions. The base case assumes 0% in year 1, below that rate, because organic sales fell 2.1% in FY2026 (Contractor Solutions down 3.6% on lower unit volumes, partly offset by pricing). Base case, about $135 per share: owner earnings stay flat at $11.07 for ten years, then fade 5% a year. We credit no growth. Pricing gains, cross-selling into Aspen and MARS, new products and further acquisitions are left out because none is contracted or has yet shown up in organic sales; future tuck-in deals would also be paid for with the same cash we already count as earnings. The fade reflects that the earnings come partly from acquired customer relationships and trademarks, which the company amortizes ($51.2 million in FY2026 including inventory step-up, versus $28.0 million in FY2025). That amortization is non-cash and correctly added back, so we did not lower the earnings level; the decay is carried in the fade instead. Bear case, about $86.50: owner earnings fall 6% a year for five years, since organic sales are already shrinking and fixed costs magnify volume declines. The $751.5 million balance due in fiscal 2031 is refinanced at an assumed 1.5 percentage points higher, costing about $0.53 per share a year. Earnings are then flat for five years and fade 10% a year afterwards. The FY2026 impairment of $15.6 million on the Greco businesses shows acquisitions can disappoint. Bull case, about $181: the acquisitions already owned deliver a full year of earnings, lifting owner earnings to $13.50 per share (below the roughly $14.90 implied if the April-June 2026 pattern repeats). It then stays flat for ten years and fades 3% a year. What would make this wrong: MARS earned only $3.9 million pre-tax in its first five months against a $658.1 million price, so if integration disappoints, the bear case is more likely. Rising rates, further large debt-funded deals or further impairments would also hurt; conversely, strong pricing and volume recovery would support the bull case. Debt is not deducted from the values because owner earnings are already after interest; leverage is reflected in the bear case.