$26.73
$80.69
bear $26.73
base $50.33
bull $80.69
margin of safety $26.00
market price* $165.14
Powell Industries (Houston, founded 1947) designs and builds custom-engineered electrical equipment that distributes, controls and protects large flows of power: integrated power control room substations, E-Houses, switchgear, medium-voltage circuit breakers, motor control centers and bus duct, plus field service. Every job is engineered to order and usually won by competitive bid against much larger rivals such as ABB, Eaton, Schneider and Siemens. In fiscal 2025 (year to September 30) revenue was $1.10 billion: oil and gas 37%, electric utility 25%, commercial and other industrial (including data centers) 16%, petrochemical 14%, light rail traction power 4%. The company carries no debt (nothing drawn on its $150 million bank revolver, which runs to October 2028) and held $634 million of cash at June 30, 2026. Share figures below reflect the three-for-one stock split effective April 2, 2026. What the record shows. Owner earnings (operating cash flow with working-capital swings removed, less stock compensation and the capital spending needed to stay in business) were about $0.85 per share in fiscal 2016, roughly zero in 2017-2018, $0.20-$0.66 in 2019-2022, then $1.34 in 2023, $3.83 in 2024 and $4.67 in 2025. This is a deeply cyclical business: when oil and gas spending collapsed in the mid-2010s, revenue fell from $662 million to $396 million in two years and earnings disappeared. The median across the full ten-year cycle (2016-2025) is only about $0.60 per share, while the last two years are six to eight times that. Gross margin has risen from 21% in fiscal 2023 to 29% in fiscal 2025 and about 31% in the June 2026 quarter, so we do not treat today's peak-cycle level as permanent. Accounting choices that matter. Interest earned on the cash pile (about $16 million pre-tax in fiscal 2025) is stripped out of the earnings stream because the cash itself is counted separately; counting both would double-count it. Customers pay large advances on these projects (contract liabilities reached $466 million at June 30, 2026), so part of the cash is customer money that flows back out when orders slow. We therefore hold back about $91 million (the net cash the company has taken in from working capital, mainly customer advances, since the upswing began in fiscal 2023) plus $50 million of operating cash before counting the rest as surplus, and hold back a further $150 million in the bear case. What is secured. Backlog was $1.4 billion at September 30, 2025 and reached a record $2.4 billion at June 30, 2026 after $934 million of orders in a single quarter, including a data-center order for on-site generation equipment worth more than $400 million, a roughly $60 million Gulf Coast LNG order and a roughly $75 million fertilizer order. Earlier awards include two large domestic LNG projects, two large offshore projects, the largest utility award in the company's history (a new power plant) and a potash mine project scheduled for late fiscal 2027 and beyond. Contracts can be cancelled for convenience, but most reimburse costs plus a reasonable margin. That backlog covers roughly two years of revenue and is the only growth we treat as in the bag. Future orders beyond it, further margin expansion and the hoped-for durability of data-center and utility demand are not credited in the base case. Growth check. Owner earnings per share rose 22% in fiscal 2025 (25% excluding interest income), and the first nine months of fiscal 2026 ran roughly a fifth ahead of the prior year. The base case's first year assumes $5.00 per share against $4.34 for fiscal 2025 excluding interest, a 15% step that sits below the trailing growth rate and matches the trailing twelve-month level the backlog is already delivering. Base case ($50.33): earnings of $5.00, $5.20 and $4.90 per share over the next three years as the $2.4 billion backlog converts at roughly today's margins, then a fade as the order cycle normalizes: $4.00, $3.20, $2.60, $2.20, $1.90, $1.60 and $1.40 in years four through ten, settling at $1.25 per share (about $45 million a year) indefinitely. That long-run figure is what the business actually earned on average over its last full cycle: owner earnings totalled 7.2% of revenue across fiscal 2016-2025, on average revenue of $626 million. The business is worth about $1.35 billion ($36.87 per share); it owes nothing; surplus cash adds about $493 million ($13.46 per share). Bear case ($26.73): the backlog is delivered but on squeezed margins, since fixed-price contracts leave the company exposed to copper, aluminum, steel and tariff costs it has flagged, and new orders dry up once the LNG and data-center wave passes, repeating the 2016-2018 collapse when owner earnings went to zero. Earnings run $4.30, $3.60 and $2.40, then fall to $0.20-$0.60 for years four to ten and stay at $0.60, the full-cycle median. Customer advances unwind and consume more cash. The business is worth about $636 million ($17.37 per share), no debt, and about $343 million of surplus cash ($9.36). Bull case ($80.69): the backlog converts at today's 30%-plus gross margin, the Jacintoport yard expansion (a $12.4 million project adding 62% more laydown capacity, due by the end of fiscal 2026) and the completed Houston electrical products expansion stay full, and the utility and data-center diversification keeps orders near today's pace for several years: $5.30 rising to $6.00 by year three, easing to $3.30 by year ten and holding at $3.00 (about $110 million a year, roughly 10% margins on $1.1 billion of revenue). Business worth about $2.37 billion ($64.75), no debt, $584 million of surplus cash ($15.94). Margin-of-safety price. Because outcomes range from about $27 to $81 and Powell's own history shows earnings can vanish within two years of a peak, the margin-of-safety price is set where the bear case implies roughly break-even and the base case implies well over 20% a year. From $26, if the base case plays out over three years, it implies about 25% a year (plus a dividend of about $0.36 per share a year), while the bear case implies roughly the starting price. The margin-of-safety price is $26. What would make this wrong. On the upside, if utility, data-center and LNG demand proves structural and Powell keeps winning orders near $1 billion a year at current margins well past the existing backlog, the long-run level here is too low. On the downside, cancellations or large cost overruns on fixed-price mega-projects would hit the near-term years that carry most of the value. Since our previous analysis. Values rose modestly (bear $22.44 to $26.73, base $44.83 to $50.33, bull $78.74 to $80.69). The main reason is the record June-quarter order intake that lifted backlog from $1.4 billion to $2.4 billion, which extends the high-earning period. Offsetting that, we now assume a lower long-run earnings level once the cycle turns (about $45 million a year rather than $80 million) and hold back part of the cash as customer advances. We also now value all cases at a single 6% rate and express risk only through the cases themselves.