$9.32
$26.91
bear $9.32
base $19.38
bull $26.91
margin of safety $8.50
market price* $36.23
Interface designs and sells modular carpet tile (Interface and FLOR brands), nora rubber flooring (acquired in 2018, made in Germany) and luxury vinyl tile (made by a third party in South Korea). In the first half of 2026 about 61% of sales were in the Americas and the rest in Europe, Africa and Asia-Pacific. Corporate office is still the largest end market but is shrinking as a share of sales: 44% in 2025 versus 47% in 2024 and 49% in 2023, with more than half of sales now going to education, healthcare, public buildings, hospitality, retail and residential living. Revenue has barely grown: $1.343 billion in 2019 and $1.387 billion in 2025, about 0.5% a year, with a dip to $1.103 billion in 2020. The improvement in earnings since 2020 came from margins and lower interest costs, not from selling more. How we measure the cash. We start from operating cash flow, remove the swings from receivables, inventories, prepaid items and payables, subtract the cost of stock paid to employees, and subtract maintenance capital spending (total spending less the part tied to revenue growth). On that basis owner earnings per share were $0.88 (2016), $1.25, $1.06, $0.89, $0.44 (2020), $1.19, $1.76, $1.02, $1.56 and $1.70 (2025); the 2025 total was $100.5 million. Because lenders are paid out of the business, we value the business before interest and subtract net debt, which means adding cash interest paid back: that gives $0.96, $1.36, $1.29, $1.28, $0.99, $1.58, $2.19, $1.51, $1.95 and $2.00 per share for 2016 to 2025. We use the median of 2021 to 2025, $1.95 per share (about $114 million), as the normal level. That period is the company as it exists now, includes the 2022 inflation squeeze and the 2023 inventory reduction, and leaves the 2020 pandemic collapse to the bear case. The 2022 figure is higher than the cash the company actually collected that year because we remove an $84 million working-capital outflow. The goodwill and intangible write-downs of $121 million (2020) and $36 million (2022) are non-cash and already inside operating cash flow; they are a reminder that past acquisitions did not earn what was paid for, which is one reason no acquisition-led growth is credited. Amortization of acquired intangibles is only about $3 million a year now, so there is no large wasting asset to adjust for. Second-quarter 2026 gross profit includes $15.6 million of refunds of previously paid IEEPA tariffs; we excluded that one-time item. The company expects 2026 capital spending of $55 million (annual report) to $60 million (second-quarter update), against $43.8 million of maintenance spending in 2025. The 2025 increase was attributed to manufacturing automation and robotics; if the higher level proved permanent it would lower our normal level by about $0.28 per share, or roughly $3 of value per share. Growth check. Business cash flow per share grew 2.8% in 2025 ($1.95 to $2.00). Our base case assumes 0% in year 1, below that trailing rate. No growth is credited in any case: nothing is contracted, sales have not outgrown inflation since 2019, and the 2026 order gains (orders up 5.4% in the second quarter) and healthcare strength (billings up 19%) are one or two quarters of evidence, not a multi-year mechanism. Share buybacks ($18.2 million in 2025, $20.8 million in the first half of 2026) are not credited either, because the diluted share count has stayed between 58.3 and 59.2 million since 2019. Debt. At July 5, 2026 borrowings were about $204 million, plus $11.5 million of finance leases; cash was $81.5 million, of which we treat $40 million as needed to run the business. Net debt is therefore about $174 million, or $2.99 per share on 58.3 million diluted shares, and it is subtracted in every case. In late 2025 the company redeemed its 5.50% senior notes using a new $170 million term loan under a credit facility that matures December 3, 2030, with quarterly amortization that began in 2026, and a $250 million revolver ($243.2 million available at year-end 2025). The loans cost SOFR plus 1.125% to 2.0%, and the company expects about $10 million of interest expense in 2026; that is in line with ordinary borrowing costs, so we made no cost-of-debt adjustment. Covenants require secured net leverage no higher than 3.0 times and interest cover of at least 2.25 times. Each case below can carry its debt: even the bear trough of about $58 million of annual business cash flow compares with interest of roughly $10 million. Base case: $19.38 per share. The business keeps producing $1.95 of cash per share for 20 years, and nothing is assumed after that. Revenue has stayed between $0.96 billion and $1.39 billion in every year from 2014 to 2025, through the 2020 shutdown and the 2022 to 2023 cost shock, because floors wear out and architects, designers and contractors keep specifying the product. Twenty years is a judgement that extends that twelve-year record; we have no evidence beyond it. The business is worth $22.37 per share (about $1.30 billion); it owes $2.99; the difference is $19.38. Bear case: $9.32 per share. Commercial flooring follows construction and office activity, so the bear case includes a full downturn of the 2020 kind, when sales fell 17.9% and business cash flow per share fell 23%. It assumes margins give back recent gains as in 2022 to 2023 (cash flow of $1.50 in 2026, close to the 2023 level of $1.51), then a 2020-style fall to $1.15 in 2027 and $1.00 in 2028 (the 2020 trough was $0.99), a partial recovery to $1.15 in 2029, and a permanent settling at $1.30 (the 2017 to 2019 average was $1.31) as corporate office keeps shrinking, ending after 15 years. Tariffs on imported vinyl tile and German-made rubber flooring are a further reason not to assume today's margins hold. The business is worth $12.31 per share (about $718 million); it owes $2.99; the difference is $9.32. Bull case: $26.91 per share. The gross margin gains already visible are kept. First-quarter 2026 gross margin was about a point above a year earlier, second-quarter margin was 1.3 points above excluding the tariff refund, and first-half 2026 operating income excluding the refund was about 22% higher than a year earlier. Management guides to a 40.6% adjusted gross margin for 2026 against about 38.7% in 2025, worth roughly $28 million of extra gross profit on guided sales of about $1.47 billion, or about $0.35 per share after tax. We therefore assume $2.20 in 2026 and $2.35 per share a year for 24 years after that, ending after 25 years. The business is worth $29.90 per share (about $1.74 billion); it owes $2.99; the difference is $26.91. Compared with our previous analysis. Our earlier figures (bear $5.84, base $21.24, bull $36.69) were prepared on a different basis and are not comparable, so we draw no conclusion from the difference. No new company filing has appeared since that analysis. Margin-of-safety price: $8.50. How sure are we of the earnings level? Reasonably, not precisely: business cash flow per share ranged from $0.99 to $2.19 over 2018 to 2025 and the median of those eight years is $1.55, so the $1.95 normal level rests on the post-2020 period. The worst plausible outcome is an office and construction downturn arriving together with tariff costs that cannot be passed on, as in 2020 or 2022 to 2023, which the bear case models; the business survives that because borrowings of about $216 million compare with $118 million of business cash flow in 2025 and the facility runs to 2030. Outcomes no case models are a much deeper office-market contraction than 2020 and another large write-off. If we are wrong about the level (a lasting $1.50 rather than $1.95) the base case is worth about $14 per share; if cash flows last 10 years rather than 20, about $11. The price assumes a four-to-five-year holding period, during which the company returns cash through buybacks. At $8.50, 2025 owner earnings of $1.70 per share are a 20% yield after interest, and the bear path would still produce roughly $4 per share of cash over four years, about half the price, while leaving the business intact. That is why the margin-of-safety price is $8.50 and not higher.