Garrett Motion Inc. (GTX) stock intrinsic value fair value estimate & owner earnings analysis

Garrett Motion designs and makes turbochargers and related boosting and electric-compression products, sold mostly to automakers (about 86% of 2025 sales of $3.58 billion) and, for the remaining 14%, to the replacement-parts market. Its largest customers are Stellantis (12% of sales), BMW (11%) and Ford (11%); the top ten customers are about 62% of sales. About half of sales are in Europe, roughly a fifth each in North America and Asia, and the rest in South America. How we measure earnings. We use cash the business generates after paying interest, after routine working-capital swings, after stock compensation (treated as a real cost) and after only the capital spending needed to keep the plants running. On that basis the business produced roughly $330 million in 2022, $374 million in 2023, $311 million in 2024 and $365 million in 2025. We use the middle of those four years, about $347 million, or about $1.83 per share on the roughly 190 million shares now outstanding. Earlier years are not used: 2021 was distorted by the bankruptcy exit and its payments (cash flow was negative), and 2018-2020 describe a company with a different ownership and share structure (a large convertible preferred issue existed until 2023, and Garrett bought back and converted it, partly funded with debt). 2025 included about $40 million of one-time recoveries of import tariffs, which is another reason we do not lift the level to the latest year. Per-share figures for 2022 and 2023 are approximate because of that preferred stock. Growth reconciliation. Earnings grew about 17% in 2025 (from $311 million to $365 million); our first year assumes no growth from the normalized level, below that rate, because part of the 2025 gain came from working-capital timing, lower capital spending and the tariff recoveries. Revenue has grown only about 1% a year since 2018, so we do not extrapolate a faster pace. Base case, about $19 per share. Earnings stay near $1.83 per share for five years, supported by launches and program ramp-ups already in production (gasoline turbo sales rose 6% in 2025 on new applications in Europe, North America, South America and India, and diesel sales held up as European passenger cars moved to gasoline hybrids, which still use turbochargers). After that we assume a gradual 4% yearly decline over about twenty years as combustion-engine volumes shrink, then nothing. We give no credit to the electric-motor, fuel-cell compressor, data-center cooling or large-turbo (MEG) product lines: development spending is real (about half of R&D) but revenue and contracts at scale are not yet evidenced. Bear case, about $6.80 per share. A downturn like 2019-2020, when earnings fell to $126-165 million, hits with $1.44 billion of debt (including $800 million of 7.75% notes due 2032) still carrying interest; earnings run at about $0.95 per share for three years and then decline 8% a year over twelve years as combustion-engine volumes fall faster and the three largest customers (34% of sales) press on price. Customer concentration and leverage are the named risks. Bull case, about $24 per share. New programs and the aftermarket business keep earnings at roughly $2.10 per share (about $400 million, near the 2023 and 2025 levels plus a bit more) for eight years, followed by a slower 3% yearly decline over seventeen years. Only demonstrated levers are used, not new-market wins. What could make this wrong. A faster collapse in turbo demand from electric vehicles, loss of a major platform at Stellantis, BMW or Ford, tariff costs that cannot be passed through, or a pending Brazilian tax dispute (about $26 million, not accrued) are the main risks. Small changes in the decline rate matter a lot because the value is mostly in the later years. Because the debt is already reflected through interest paid in cash flow, we do not deduct it again. The margin-of-safety price is about $9.50, roughly half of the base value and about 40% above the bear case, reflecting the combustion-engine exposure, customer concentration and debt. A stable cash flow record since 2022 supports the base case, but the structural decline in combustion engines argues for a large margin of safety.