$40.43
$91.57
bear $40.43
base $61.06
bull $91.57
margin of safety $32.00
market price* $64.24
Worthington Enterprises is what remained of Worthington Industries after the steel processing business was spun off as Worthington Steel on December 1, 2023. It makes a set of niche metal products and owns two valuable joint ventures. Building Products (about 62% of fiscal 2026 sales) makes refrigerant and propane cylinders, well-water and expansion tanks, HVAC parts (Elgen, bought June 2025) and standing-seam metal roof clips (LSI, bought January 2026 for $206.6 million). It also holds 50% of WAVE, the largest of four North American makers of suspended-ceiling grid, run with Armstrong World Industries, and 25% of ClarkDietrich, a steel framing maker. Consumer Products (about 38%) sells Bernzomatic torches, Coleman-licensed camping cylinders, Level5 drywall tools, Balloon Time helium kits and griddles, mostly through big retailers. One retailer takes 28% of Consumer sales and 10% of company sales. About 12% of sales are outside the US, mainly in Europe. The joint ventures matter a great deal. In fiscal 2026 (year ended May 31, 2026) WAVE contributed $118.1 million of pre-tax equity income, up from $110.1 million. ClarkDietrich contributed $21.9 million, down from $40.8 million because of pricing pressure and a weaker project mix. Together they produce roughly half of the company's cash earnings, and the cash they pay out has been slightly higher than their reported earnings. Earnings level. We measure owner earnings as operating cash flow, minus the swing in working capital, minus stock compensation, minus the capital spending needed just to stay in business. On that basis, owner earnings were $2.84 per share in fiscal 2025 and $3.71 in fiscal 2026. To value the business before its lenders, we add back about $0.25 per share of cash interest. That gives $3.08 and $3.96 per share. Only these two years describe the business as it exists now. Fiscal 2024 still contains about six months of steel cash flows and a since-deconsolidated energy-cylinder unit. Earlier years were a much larger, steel-price-driven company. We anchor on the middle of the two clean years, $3.52 per share, rather than the stronger 2026 figure. Fiscal 2026 owner earnings rose 31%. The first year of our base case is $3.60, below the fiscal 2026 actual. The small step up above the anchor reflects a full year of owning LSI, which was already paid for, and a first quarter of fiscal 2027 (ended August 31, 2026) in which sales rose 13%, with $19.2 million from acquisitions, and operating cash flow was $66.7 million against $41.1 million a year earlier. Worthington has not disclosed LSI's standalone earnings, so we credit its full year only modestly. Impairments in 2024 and 2025 ($34.4 million and $50.8 million) and amortization of acquired customer relationships (about $17 million a year) are non-cash and added back. Because acquired relationships wear out, we keep growth well below WAVE's record rather than treating those intangibles as permanent. Growth credited. We give no credit for future acquisitions. They are paid for out of the same cash we are valuing, and at the prices Worthington has paid recently they are worth about what they cost. We credit only modest organic growth. WAVE increased its contribution to $118.1 million in fiscal 2026 even though construction markets were soft. The company's joint-venture income also kept rising through the 2020 shutdown, from $97 million in fiscal 2019 to $123 million in fiscal 2021. Replacement demand for cylinders and tanks is steady. We give no credit to new markets the company is promoting, such as tanks for data centers, because they are not yet proven. Base case: cash earnings of $3.60 per share next year, growing 1.5% a year to about $4.12 by year ten. After that they hold flat, with no further growth. That is supported by WAVE's position as the leading ceiling-grid maker, a business that has earned well since 1992, and by the replacement cycle of an installed base of cylinders and tanks. The business is worth about $66.46 per share. After net debt of $5.40 per share, the shares are worth about $61.06. Bear case: a downturn on the scale of 2008-2010. In the first quarter of fiscal 2010, the company's joint-venture income fell 36%. WAVE kept earning even as its volumes fell 32%, and cylinder segment operating income fell about two-thirds. We model cash earnings falling from $3.50 to a trough of $2.00 per share in year three, 43% below the anchor. They recover only to $3.30, because ClarkDietrich's weaker pricing persists and the concentration in big-box retail is a lasting drag. After year ten they decline 1% a year. We also charge $2.00 per share for a repeat of the 2024-2026 pattern, when about $100 million of goodwill, long-lived assets and notes receivable were written down and the composite-cylinder stake was later sold at a loss. The business is worth about $47.83 per share, or about $45.83 after the write-down charge. Less $5.40 of net debt, the shares are worth about $40.43. Even at the trough, cash earnings of roughly $100 million cover about $12.5 million of interest many times over. Bull case: cash earnings of $3.75 next year. ClarkDietrich returns to its fiscal 2025 contribution over years two and three, a level it has already earned. WAVE's pricing record continues, giving 3.5% annual growth through year ten and 1.5% thereafter. The business is worth about $96.97 per share, and the shares about $91.57 after net debt. Debt. Worthington owes about $307 million, all at fixed rates and well below today's borrowing costs. That is $200 million of 4.30% notes due August 2032, plus euro notes at 2.06% (EUR 30 million due 2029, EUR 6.7 million due 2031) and 2.40% (EUR 23.3 million due 2031, EUR 31.7 million due 2034). The cheap coupons are worth about $34 million to shareholders until these mature. We treat the $27.7 million of year-end cash as working cash and add about $4 million of Hexagon shares received in the October 2025 sale of the composite-cylinder business. Net debt is therefore about $269 million, or $5.40 per share. In every case the business is worth far more than it owes: about $2.3 billion in the bear case (after the write-down charge), $3.3 billion in the base case and $4.8 billion in the bull case, against about $0.27 billion owed. No maturity before 2029 matters to the outcome. WAVE carries its own debt, which is already reflected in the income it pays Worthington. Previous estimates for this company were prepared on a different basis and are not comparable. Margin-of-safety price. We are reasonably, not highly, confident in the earnings level. It rests on only two clean years. The latest quarter supports it, and ClarkDietrich was at a weak point in 2026 rather than a peak. The worst plausible outcome is a deep commercial-construction slump that hits WAVE and ClarkDietrich together, combined with the loss of the retailer that buys 10% of sales. Low, fixed-rate debt with no maturities until 2029 means the company would survive that. The real exposure is that close to half the value sits in a joint venture Worthington does not control alone. If we are wrong about WAVE's durability, and its earnings were permanently a third lower, the shares would lose roughly $10-11. Losing the largest retail customer would cost about another $5. The shares would then be worth roughly in the mid $40s even before any recession. The business pays about $0.80 a year in dividends and buys back shares over the holding period. The price assumes a three-to-five-year holding period for value to be recognized. At $32, the company's own cash earnings of about $3.50 per share equal roughly 11% a year of that price. The bear case value sits above that price, and the base case implies 20% a year if value is recognized within about four years. Above that price, the bear case and a slow recognition of value would leave too little room for error. The margin-of-safety price is $32.