HELIOS TECHNOLOGIES, INC. (HLIO) stock intrinsic value fair value estimate & owner earnings analysis

Helios Technologies makes hydraulic and electronic motion-control components used inside other companies' equipment. The Hydraulics segment (Sun, Faster, NEM, Taimi, Daman and Schultes brands) supplies cartridge valves and fluid-conveyance components that get engineered into mobile and industrial machines -- agricultural and construction equipment, material handling, and other off-highway gear. Once a Sun valve is designed into a machine platform it typically stays sole-sourced for that platform's life, which is the durable part of this business. The Electronics segment (Enovation Controls, Murphy, Balboa Water Group and others) supplies electronic controls both for that same industrial/mobile equipment and, through Balboa, for pool and spa manufacturers -- a more consumer-discretionary, cyclical end market. Helios transformed itself with the 2021 acquisition of Balboa, which roughly doubled revenue and shifted the mix toward recreational products; in September 2025 it also sold a smaller Asia-Pacific hydraulics subsidiary (Custom Fluidpower) for modest proceeds, a portfolio trim rather than a strategic shift. We based our estimate of the company's underlying cash-generating power on results since the Balboa acquisition (2021 through 2025), which capture a full swing from a post-pandemic demand surge in pool and spa products, through a sharp two-year inventory destocking bust across both segments, to today's recovery. The midpoint of that five-year run -- which also happens to be last year's (2025) result -- is our starting point. We calculate owner earnings as operating cash flow less the swing in working capital, less stock-based compensation, less the portion of capital spending needed just to maintain the existing business (as opposed to fund growth). About half of the company's depreciation and amortization charge is amortization of intangible assets booked in the 2021 acquisition (customer relationships, technology, trade names); we have not double-charged for that decay by lowering today's earnings level, but we have built its gradual runoff into the growth path for the years beyond our ten-year forecast, since the acquired customer relationships and brand value it represents are not being replaced by any separately identifiable ongoing investment. Last year's owner earnings grew about 27% over the prior year, but a meaningful part of that reflects a favorable swing in the timing of cash tied up in receivables and inventory, not a durable step-up in profitability, so we assumed a more modest 6% growth rate for the coming year and a gradually slowing pace after that. Our base case assumes a continued, unspectacular recovery: mobile-equipment demand stabilizes and grows slowly, the pool and spa aftermarket settles into ordinary replacement-driven demand rather than another boom-bust cycle, and the company's long-standing OEM design-in relationships continue to renew themselves without requiring large new investment. On that path we estimate the shares are worth roughly $67 today. Our bear case (roughly a one-in-ten downside) assumes mobile-equipment and recreational-products demand weaken together -- a plausible outcome since both are tied to discretionary capital spending -- compressing margins as factories run below capacity, while the company's real debt load (around $368 million, roughly four times last year's owner earnings) leaves less room to invest through the downturn. Earnings power falls further than in the 2022-2023 downturn and stays depressed longer before a slow recovery. On that path the shares are worth roughly $34. Our bull case (roughly a one-in-ten upside) assumes both segments see a synchronized cyclical upswing, margins expand as factories run closer to capacity, and management redeploys free cash flow and recent divestiture proceeds into further bolt-on acquisitions of the kind that have driven growth historically. On that path the shares could be worth roughly $84. Because the 10-year explicit forecast captures only part of the picture, a meaningful share of our estimate -- roughly 60-65% across all three cases -- rests on our view of what the business earns in the years beyond that, which we tied to a very modest 0.9%-1.5% annual growth rate reflecting a mature, largely self-renewing OEM component supplier rather than a fast grower. We flag this because it is the single largest judgment call in the valuation. Given the roughly one-in-ten downside case is only about half of our base-case estimate, and given the company's real leverage, the margin-of-safety price is set at a meaningful discount -- around $44 -- wider than a purely mechanical discount would suggest, specifically because of that debt load. One item we could not fully reconcile from the filings: a small $0.39 million 'non-cash restructuring' charge referenced in the 2018 annual report's cash flow footnote does not clearly map to any of the three years shown, and we have not included it -- it is too small to matter to the valuation.