FULLER H B CO (FUL) stock intrinsic value fair value estimate & owner earnings analysis

H.B. Fuller is a global maker of industrial adhesives, sold in 34 countries. In 2025 about 45% of revenue came from Hygiene, Health and Consumable Adhesives (diapers, packaging, tapes and labels), 30% from Engineering Adhesives (transportation, electronics, appliances and similar uses) and 25% from Building Adhesive Solutions. About 56% of revenue is earned outside the United States. The business is steady but not fast-growing: revenue was $3.47 billion in 2025, down from a peak of $3.75 billion in 2022, and organic revenue in 2025 was flat. The main outside force is raw materials: the company spent about $1.7 billion on them in 2025, roughly half of revenue. Its main financial feature is debt of about $2.1 billion, taken on largely to buy Royal Adhesives in late 2017. How we measured earnings. We start with cash from operations and remove working-capital swings (receivables, inventories, payables and similar items), then deduct stock-based compensation as a real cost and deduct maintenance capital spending. Spending judged to be for growth, based on the company's long-run capital spending relative to revenue and how much revenue grew that year, is left out; in most years there was no revenue growth, so all capital spending counted as maintenance. Amortization of acquired intangibles (about $87 million a year) and one-time non-cash charges are correctly excluded because they do not cost cash; because those acquired customer relationships are a wasting asset, we do not let earnings grow, and we fade the cash flow to zero in the very long run. Foreign-currency remeasurement was not treated as working capital. Owner earnings per diluted share, after interest, were: 2019 $3.37, 2020 $2.21, 2021 $5.92, 2022 $3.16, 2023 $2.08, 2024 $2.94, 2025 $2.00 (2016 to 2018 were also computed). We then add back the cash interest paid, because the lenders are valued separately below: that gives cash produced by the business before lenders of $5.43, $3.53, $7.07, $4.67, $4.53, $5.32 and $4.39 per share for 2019 to 2025. We use the median of 2019 to 2025, $4.67 per share (about $258 million a year). We start after the Royal acquisition and exclude 2016 to 2018, which describe a much smaller company or the first, disrupted integration year. We did not use the latest twelve months as the anchor. Growth check. Cash produced by the business before lenders fell 17.5% in 2025 ($4.39 versus $5.32). Our base case assumes 0% change from the $4.67 anchor in year one, which is higher than the trailing actual. The dated reason is the half-year report for fiscal 2026 (filed June 25, 2026): gross margin was 32.3% versus 30.4% a year earlier, net income $88.9 million versus $55.1 million, and operating cash flow $117.2 million versus $57.8 million, on revenue up 2%. Against that, management expects 2026 capital spending of about $160 million versus $142 million in 2025, and first-half spending was $104 million versus $65 million; we treat the profit gains as roughly offsetting that extra spending. One thing we could not resolve fully: in 2025 net income rose to $152 million from $130 million while cash before working capital fell. Part of the explanation is that 2024 profit was depressed by a $47 million non-cash write-down, and 2025 profit included larger non-cash deferred-tax and pension credits, so cash earnings actually slipped. What the cases assume. No growth is credited in any case: organic revenue is flat, debt-funded acquisitions have not lifted cash per share since 2018, and margin gains, cost savings and a market recovery are not named contracts, so they are left out. Base case: cash before lenders holds at $4.67 per share for ten years, then fades in a straight line to zero over the following twenty years (reflecting the wasting acquired customer relationships and no named driver beyond that). Discounted at 6%, the business is worth about $51.41 per share (roughly $2.84 billion). Debt owed is about $38.01 per share ($2.10 billion: $2,046 million of borrowings at the November 2025 year end plus a $55 million rise in long-term debt by May 2026), so the shares are worth about $13.40. Bear case: 2025's $4.39 level is cut by about $0.33 for the higher 2026 capital-spending plan to about $4.05, then declines 2.5% a year for nine years, matching the revenue decline of 2022 to 2025, then fades to zero over fifteen years. The business is worth about $36.41 per share ($2.01 billion) against $38.01 of debt, so the company appears to owe more than it is worth, by about $1.60 per share (roughly $89 million). About $1.07 billion of debt comes due by October 2028: the 4.00% notes ($300 million, 2027), the term loan A ($431 million) and revolver ($36 million drawn, both February 2028), and the 4.25% notes ($300 million, October 2028), followed by the $979 million term loan B in February 2030. Cash from the business in this case ($224 million in year one) still covers the 2025 cash interest bill of $132.5 million about 1.7 times, so refinancing looks workable, but it would leave shareholders with little or nothing. Bull case: cash before lenders is $5.30 per share, the 2024 level the business actually achieved, supported by gross margin rising from 28.7% in 2023 to 31.1% in 2025 and the ERP project (Project ONE) being largely paid for ($265 million spent of a $300 to $320 million total). It is held for ten years and fades over twenty. The business is worth about $58.35 per share ($3.23 billion) less $38.01 of debt, so about $20.34. Because debt is about three-quarters of the business's value in the base case, small changes in the business move the share value a lot. Debt costs about 5.7% on the term loans (a floating rate, with $400 million swapped to a fixed 3.73%) and 4.00% to 4.25% on the notes, so on balance it is close to our 6% rate and we made no cost-of-debt adjustment. We counted the $114 million of cash as needed to run operations in 34 countries and did not subtract it from debt. We previously showed a much wider range (a negative bear case, a $3.91 base and a $47.25 bull) built on higher discount rates and a different earnings measure. The rebuilt base is higher and the bull lower and narrower, on a consistent 6% rate with debt subtracted from the value of the business. What would make this wrong: raw-material costs rising faster than prices can be passed on, capital spending staying near $160 million a year, or lenders demanding much higher rates when the 2027 and 2028 maturities are refinanced. The margin-of-safety price is well below the base case, about $5.00, given the debt and the negative bear case.