ITRON, INC. (ITRI) stock intrinsic value fair value estimate & owner earnings analysis

Itron sells the meters (Device Solutions), communications networks (Networked Solutions) and software and services (Outcomes) that utilities use to run electric, gas and water distribution, plus a new Resiliency Solutions line that produced $3 million of revenue in 2025. Revenue was $2.37 billion in 2025, down from $2.44 billion; about 81% came from the United States and Canada. No customer exceeded 10% of revenue and the ten largest were 32%. HOW WE MEASURED EARNINGS. We use cash earnings per share: cash from operations, less stock compensation, less maintenance capital spending, with swings in working capital removed, then adding back cash interest paid to lenders and removing interest earned on the company's cash (we count the cash separately, against debt). On that basis the last nine years were: 2017 $3.19, 2018 $1.01 (the year Silver Spring Networks was acquired; net loss $99 million), 2019 $4.20, 2020 $2.82, 2021 $0.81 and 2022 $0.56 (pandemic and semiconductor-shortage years), 2023 $3.43, 2024 $3.58 and 2025 $6.22. Earlier figures are not available in structured form. Accounting judgements: stock compensation ($62 million in 2025) is treated as a real cost; restructuring payments ($22 million) and other operating outflows ($53 million in 2025) are left in as real costs; amortization of acquired intangibles is small ($18 million in 2025) so no wasting-asset adjustment was needed; 2025 capital spending was only 1.0% of revenue versus a 1.76% nine-year average, which flatters 2025 by roughly $0.40 a share; cash taxes paid fell to $56 million in 2025 from $80 million in 2024 and the filing says the July 2025 tax act's immediate deductions on research and property were built into its tax forecasts. STARTING LEVEL. We start at $4.90 a share, the midpoint of 2024 and 2025. Operating margin moved from 5.9% in 2023 to 10.8% in 2024 and 13.2% in 2025 as gross margin rose from 32.8% to 34.4% to 37.7%, and first-half 2026 held at 12.5% operating margin with gross margin of 40.6%; first-half 2026 cash earnings ran at roughly $5.4 a share annualized before working-capital adjustment. Years before 2024 describe a lower-margin, restructuring-heavy business and are not used for the level. We did not use 2025 alone because it was the strongest year in the record. Growth check: cash earnings grew 74% in 2025 ($6.22 versus $3.58), but we assume 0% for year 1, below that, because 2025 bookings of $2.10 billion were only 0.89 times revenue (versus $2.70 billion in 2024), total backlog slipped to $4.5 billion from $4.7 billion, twelve-month backlog to $1.6 billion from $1.8 billion, and first-half 2026 revenue was $1.15 billion versus $1.21 billion, down 5.3%. WHAT IS LEFT OUT. We credit no growth. The 1.8% annual revenue growth since 2016 depends on utility spending, not on a mechanism the company controls. Locusview (bought January 2026 for a preliminary $525 million) is not credited because its earnings are not disclosed; the cash spent on it is already out of the cash balance. Management's software-revenue targets and further margin gains are not credited. BASE CASE ($34.89 a share). Cash earnings hold at $4.90 for five years, covered by the $4.5 billion backlog and the margin level of the last six quarters, then drift down to $3.43 by year 10 (the 2019-2025 median, which includes the pandemic and chip shortage) as the replacement-meter backlog is worked off, and stay at $3.43 for 20 more years because utilities must keep metering and Itron has had at least $1.8 billion of revenue every year since 2015 and positive cash earnings in each of the last nine; nothing is assumed after year 30. The business is worth $55.38 a share; it owes $20.50 a share net; the difference is $34.89. BEAR CASE ($9.86 a share). Revenue follows the weak bookings: $3.60 for two years, then a repeat of the 2020-2022 episode, when cash earnings fell from $4.20 to $2.82, $0.81 and $0.56 before recovering to $3.43 in 2023: here $2.80, $0.80 and $0.56 in years 3-5. Margins do not recover to the 2025 level; the long-run level is $2.80, the 2017-2020 average. The trough falls on the July 2030 maturity of the $805 million 1.375% convertible notes and the September 2030 (April 2030 if the convertibles are not settled) maturity of the $750 million revolver, so we assume the full $1.61 billion is refinanced at about 9%, which adds about $285 million to what the shares owe. The company also has a record of acquisitions that went badly (losses on sale of businesses of $60 million in 2020 and $64 million in 2021, a $38 million goodwill impairment in 2022). Business worth $36.75 a share; owes $26.89; difference $9.86. In years 4 and 5 business cash flow would be below interest, which the $745 million of cash can cover. BULL CASE ($56.52 a share). The 2025 level of about $6.20 holds for ten years, supported by first-half 2026 gross margin of 40.6% and the backlog, then $4.90 for twenty years. Business worth $77.02 a share; owes $20.50; difference $56.52. DEBT. At June 30, 2026 face debt was $1.61 billion, up from $1.27 billion at year-end: the $460 million 0% convertible notes were repaid in March 2026 and about $805 million of new borrowing was added; the terms of that borrowing are not visible in the filings available, so we treat it as costing no more than normal. The 1.375% notes due July 15, 2030 (conversion price $131.24) cost far less than normal interest, worth about $122 million to shareholders. Cash was $745 million (after $515 million paid for acquisitions and $152 million of share repurchases in the first half); we count $595 million as excess and keep $150 million for operations, and subtract $22 million for outside owners of a subsidiary. Net, shareholders owe about $914 million, or $20.50 on 44.6 million diluted shares. WHAT TESTED THE CASE. We tried to break the starting level against the margin record: gross margin rose again in the first half of 2026 (40.6% versus 36.3%), which supports it, while the bookings and backlog decline is why the base case drifts lower rather than rising. Earlier estimates (bear $13, base $68, bull $121) were built on a different basis and are not comparable. MARGIN-OF-SAFETY PRICE ($18). We are moderately sure of the $4.90 level: it rests on two full years and six quarters of 11-14% operating margins, but cash earnings ranged from $0.56 to $6.22 over nine years and bookings are softening. The worst plausible outcome is a 2020-2022-style slump that arrives as $1.6 billion of debt comes due in 2030; the company has $745 million of cash and no customer above 10% of revenue, so it should survive, but shareholders could be heavily diluted. If we are wrong and earnings settle at the 2023-2024 level of about $3.4 a share for good, the shares are worth about $27; in the bear case about $10. The company pays no dividend; it repurchased $100 million of stock in each of 2024 and 2025. The price assumes a holding period of about three years. From $18, even the flat-$3.4 outcome (roughly $27 today, about $32 in three years) implies about 20% a year, which is why the margin-of-safety price is $18 and not higher.