$29.10
$79.10
bear $29.10
base $56.10
bull $79.10
margin of safety $33.00
market price* $65.35
ESAB Corporation makes welding and cutting equipment, consumables (electrodes, wire, fluxes) and related automation, sold worldwide to fabricators, shipbuilders, construction and energy customers. In June 2026 it bought Eddyfi Technologies, a Canadian maker of inspection and monitoring instruments, for about $1.45 billion. That deal changed the company: total borrowings rose from about $1.2 billion to about $2.4 billion, and ESAB also issued $175 million of mandatory convertible preferred stock (6.5% dividend) and about $140 million of new common stock. HOW WE MEASURED EARNING POWER. We count the cash the business really produces: operating cash flow, minus swings in receivables, inventory and payables, minus stock compensation (a real cost), minus the part of capital spending needed just to stay in business. On that basis owner earnings were about $3.55 to $4.86 per share in 2022-2025 (2025: $3.81, down from $4.86 in 2024). We then add back interest paid, to see what the business earns before its lenders, and subtract the debt separately. Over 2022-2025 that pre-lender cash flow was $264M, $294M, $359M and $300M; we use the middle of that range, about $297M a year, as the level. Earlier years are left out because before the April 2022 spin-off ESAB did not pay its own taxes or interest. We did not adjust the level for the amortization of acquired intangibles, which is non-cash; instead the decay of acquired customer relationships is reflected in how we treat Eddyfi's cash flow in the bear case. GROWTH CHECK. Pre-lender cash flow fell about 17% in 2025 (owner earnings per share fell 22%) after 2024 proved to be a peak. Our base case starts from $297M, roughly 1% below 2025's $300M, so it assumes a smaller decline than the last year. The reason is dated and in the filings: the second-quarter 2026 report (filed 6 August 2026) shows first-half gross margin steady at 37.5% versus 37.4%, and the weaker first-half cash flow is explained by roughly $23M of Eddyfi deal costs and about $22M of extra restructuring cost, both one-off in nature, rather than by weaker underlying trading. BASE CASE ($56 per share). The legacy business holds about $297M a year for three years while the company pays down debt (management targets net leverage below 3x by year-end, which limits acquisition spending), then grows 2% a year for years 4-10. That growth is the continuation of what ESAB has done since the spin-off: revenue grew about 3% a year from 2022 to 2025 (to $2.84 billion) through pricing and small acquisitions funded from its own cash. After year 10 we hold the level flat, resting on a business of more than a century's standing with a large installed base of equipment that keeps consuming welding products; we assume no further growth. Eddyfi is credited with about $36M a year of cash flow, held flat: it added $21.4M of sales in its first month, and the filing's pro forma figures imply roughly $210M of sales in the first half of 2025 rising to about $232M annualised in 2026. Management's talk of high-single-digit growth and $20M of synergies is not counted. Business value is about $6.07 billion. It owes about $2.58 billion (debt $2.42 billion, preferred stock $175M, outside owners' share of the Indian and other partly owned units about $90M, less about $100M of spare cash after allowing for $50M of cash trapped in Russia and normal operating needs). The difference, $3.49 billion, is about $56 per share on 62.2 million shares. BEAR CASE ($29 per share). The legacy business earns about $250M a year, below any year in the window: the 2022 low of $264M, less roughly 5% for the Russian business (about 5% of first-half 2026 sales), which is exposed to sanctions and has $50M of cash that cannot be withdrawn. There is no growth. Eddyfi delivers only $24M a year and its acquired customer relationships and technology, which the company amortises over 10-20 years, decay to nothing over years 11-20. Business value is about $4.39 billion against $2.58 billion owed, leaving $1.81 billion. Even here cash flow of about $274M covers annual interest of roughly $140M about twice, so the debt is serviceable; the main maturities are $700M of 6.25% notes due 2029, the $350M term loan due 2030 and $1 billion of 5.625% notes due 2031. BULL CASE ($79 per share). The legacy business returns to $330M, about halfway back to the $359M of 2024, and grows 3% a year for ten years, the pace of 2022-2025 revenue growth, once leverage is back under control; Eddyfi earns $45M a year, consistent with the margin profile management described. Business value is about $7.50 billion against $2.58 billion owed, leaving $4.92 billion. WHAT WE LEFT OUT AND WHY. We give no credit for Eddyfi's growth, cost savings, new markets, or further large acquisitions. Notably, ESAB paid roughly 37 times our estimate of Eddyfi's cash flow; on the evidence we can verify, that price is well above the value we can support, and it explains why our values sit far below the amount of new capital put in. Debt costs about the same as our 6% discount rate (fixed notes at 5.625% and 6.25%), so no adjustment was made. What could make this estimate wrong: Eddyfi earning materially more than our estimates in its first full year, a faster recovery in industrial volumes, or ESAB's tuck-in acquisitions compounding faster than in the past. Our reading could not be fully reconciled on two points: Eddyfi's stand-alone profit is not separately reported, so we estimated it from the pro forma results, and the final purchase price allocation is still preliminary.