Trane Technologies

Methodology

Trane Technologies' fair value calculation works reasonably well given the company's consistent earnings growth driven by HVAC replacement demand, energy efficiency trends, and commercial construction activity. However, investors should normalize for economic cycles that impact commercial building activity and normalize margins for material cost fluctuations. The method captures Trane's position as a high-quality industrial with secular tailwinds, though it may undervalue the recurring aftermarket service revenue that provides stability.

Methodology

Trane typically commands moderate to premium PEG ratios reflecting its exposure to secular energy efficiency trends and building electrification, combined with strong execution and margin expansion initiatives. The PEG framework works well for comparing Trane to other building products and HVAC companies, though investors should normalize for cyclical swings in commercial construction that temporarily impact growth. As services and software grow as a percentage of revenue, the PEG may reflect increasing earnings quality and visibility.

Methodology

Trane pays a modest dividend, so PEGY adds incremental value by incorporating the company's steady cash returns alongside growth in HVAC systems and services. However, the primary investment thesis centers on earnings growth from energy efficiency adoption and market share gains rather than income generation. For total-return investors, PEGY captures both Trane's solid growth profile and its commitment to returning cash through dividends and buybacks.