ESCO Technologies Inc. (ESE) | Investment Case

1. Company Snapshot

1.a. Company Description

ESCO Technologies Inc.produces and supplies engineered products and systems for industrial and commercial markets worldwide.It operates through Aerospace & Defense, Utility Solutions Group, and RF Shielding and Test segments.

The Aerospace & Defense segment designs and manufactures filtration products, including hydraulic filter elements and fluid control devices used in commercial aerospace applications; filter mechanisms used in micro-propulsion devices for satellites; and custom designed filters for manned aircraft and submarines.It also designs, develops, and manufactures elastomeric-based signature reduction solutions for U.S. naval vessels; and mission-critical bushings, pins, sleeves, and precision-tolerance machined components for landing gear, rotor heads, engine mounts, flight controls, and actuation systems for the aerospace and defense industries.The Utility Solutions Group segment provides diagnostic testing solutions that enable electric power grid operators to assess the integrity of high-voltage power delivery equipment; and decision support tools for the renewable energy industry, primarily wind and solar.

The RF Shielding and Test segment designs and manufactures RF test and secure communication facilities, acoustic test enclosures, RF and magnetically shielded rooms, RF measurement systems, and broadcast and recording studios; and RF absorptive materials and filters, active compensation systems, antennas, antenna masts, turntables, electric and magnetic probes, RF test cells, proprietary measurement software, and other test accessories to perform various tests.It also provides services, such as calibration for antennas and field probes, chamber certification, field surveys, customer training, and various product tests.The company distributes its products through a network of distributors, sales representatives, direct sales teams, and in-house sales personnel.

The company was incorporated in 1990 and is based in St. Louis, Missouri.

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1.b. Last Insights on ESE

ESCO Technologies Inc.'s recent performance has been positively driven by a strong Q4 2025 earnings report, with a 29% increase in sales to $353 million and a 30% increase in adjusted EPS from continuing operations to $2.32. The company's fiscal 2025 results also showed a 19% increase in sales to $1.1 billion and a 26% increase in adjusted EPS from continuing operations to $6.03. Additionally, several institutional investors have increased their stakes in the company, including Castleark Management LLC, which acquired 30,080 shares, and Advisors Asset Management Inc., which raised its position by 49.9%. Brokerages have also set a consensus price target of $187.50, with a "Buy" recommendation.

1.c. Company Highlights

Last Price	238.88
Change Percentage	2.48%
Open	234.22
Previous Close	233.09
Market Cap ( Millions)	6181
Volume	176544
Year High	238.88
Year Low	129.69
M A 50	209.81
M A 200	198.33

FCF Yield	3.33%
Dividend Yield	0.13%
ROE	22.15%
Debt / Equity	13.46%
Net Debt / EBIDTA	41.00%
Price To Book	3.96
Price Earnings Ratio	20.7
Price To FCF	30.06
Price To sales	5.32
EV / EBITDA	23.65

2. Strong Q4 2025 Results Propel ESCO Technologies to Record Performance

ESCO Technologies Inc. reported a robust fourth quarter 2025, with sales reaching $353 million, representing a 29% growth, and an organic growth of 8%. The adjusted EBIT margin improved by 100 basis points to 23.9%, and adjusted earnings per share (EPS) increased by 30% to $2.32. For the full year 2025, the company achieved record performance across key metrics, with orders exceeding $1.5 billion, up 56%, and adjusted EPS of $6.30, up 26%. The acquisition of Maritime significantly contributed to both the top and bottom line results. The company's actual EPS for the year was $8.43, significantly higher than analyst estimates of $2.12.

Publication Date: Nov -21

                                    📋 Highlights
                                    Q4 2025 Revenue Surge::
                                                ESCO reported $353 million in sales, reflecting 29% growth YoY with 8% organic growth.
Full-Year 2025 Records::
                                                Achieved $1.5 billion in orders (+56%) and adjusted EPS of $6.30 (+26%), driven by Maritime acquisition.
2026 Guidance::
                                                Expects 16-20% sales growth, 24-29% adjusted EPS rise to $7.50-$7.80, and 6-8% organic growth in A&D.
Strong Backlog and M&A Strategy::
                                                Maintains $1.1 billion in backlog and plans to prioritize aerospace, navy, and utility-focused acquisitions.
Energy Sector Challenges::
                                                Faces temporary downturn due to policy shifts but forecasts return to high single-digit growth in 2027.

                                

Guidance and Outlook for 2026

For 2026, ESCO Technologies expects reported sales growth in the range of 16% to 20%, with organic growth between 6% to 8% in its Aerospace and Defense (A&D) segment. The company forecasts adjusted EPS growth of 24% to 29%, resulting in a range of $7.50 to $7.80. The strong backlog of over $1.1 billion and a solid balance sheet position the company well for future growth. Analysts estimate revenue growth at 14.4% for the next year, slightly below the company's guidance.

Segment Performance and Outlook

The Maritime business had a strong start to 2026, securing over $200 million in orders in the first month, primarily from UK submarine-related programs. The aerospace segment is expected to grow at a rate of 6% to 8%, driven by increasing production rates and military content. The Doble business continues to see strong spending from utilities, with a record fourth quarter of orders and a trend that is continuing into the first quarter of 2026. The energy business is currently experiencing a downturn but is expected to return to high single-digit growth in 2027.

Valuation and Financial Health

With a P/E Ratio of 18.21, P/B Ratio of 3.48, and an EV/EBITDA of 29.37, the market appears to have priced in a significant amount of growth. The company's return on equity (ROE) stands at 22.15%, indicating strong profitability. ESCO Technologies generated solid cash flow and plans to pay off the Maritime debt in about a year. The company remains active in the M&A space, focusing on disciplined acquisitions that fit into its key end markets.

Cash Flow and Debt Management

The company's ability to generate cash and manage its debt is a positive indicator of its financial health. With a Net Debt / EBITDA ratio of 0.58, ESCO Technologies is in a comfortable position to service its debt. The company's priorities include continuing its disciplined approach to acquisitions and maintaining a strong balance sheet.

3. NewsRoom

Universal Beteiligungs und Servicegesellschaft mbH Cuts Holdings in ESCO Technologies Inc. $ESE

Jan -26

Source: defenseworld.net

Emerald Advisers LLC Has $29.86 Million Holdings in ESCO Technologies Inc. $ESE

Jan -22

Source: defenseworld.net

ESCO Technologies Announces First Quarter 2026 Earnings Release and Conference Call

Jan -14

Source: globenewswire.com

Brokerages Set ESCO Technologies Inc. (NYSE:ESE) Price Target at $187.50

Dec -21

Source: defenseworld.net

30,080 Shares in ESCO Technologies Inc. $ESE Acquired by Castleark Management LLC

Dec -15

Source: defenseworld.net

Federated Hermes Inc. Lowers Stock Holdings in ESCO Technologies Inc. $ESE

Dec -10

Source: defenseworld.net

Advisors Asset Management Inc. Purchases 7,161 Shares of ESCO Technologies Inc. $ESE

Nov -28

Source: defenseworld.net

Advantage Alpha Capital Partners LP Sells 27,989 Shares of ESCO Technologies Inc. $ESE

Nov -28

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.54%)

6. Segments

Aerospace and Defense

Expected Growth: 5.5%

ESCO Technologies Inc.'s Aerospace and Defense segment growth of 5.5% is driven by increasing demand for advanced military communication systems, rising global defense spending, and growing commercial aerospace production. Additionally, the company's diversified portfolio of products and services, including filtration systems, RF shielding, and test and measurement solutions, contributes to its growth momentum.

Utility Solutions Group

Expected Growth: 5.8%

Utility Solutions Group's 5.8% growth is driven by increasing demand for smart grid infrastructure, renewable energy integration, and energy efficiency solutions. Additionally, the group's focus on grid modernization, cybersecurity, and data analytics is contributing to its growth, as utilities invest in digital transformation to improve operational efficiency and customer experience.

Test

Expected Growth: 5.2%

ESCO Technologies Inc.'s 5.2% growth is driven by increasing demand for renewable energy and energy efficiency solutions, expansion in aerospace and defense markets, and strategic acquisitions. Additionally, the company's diversified portfolio and strong operational execution contribute to its growth momentum.

7. Detailed Products

Test and Measurement Solutions

ESCO Technologies' test and measurement solutions provide precision and accuracy for various industries, including aerospace, defense, and industrial manufacturing.

Utility Solutions for Electric, Gas, and Water

ESCO Technologies' utility solutions offer advanced metering, grid management, and infrastructure support for electric, gas, and water utilities.

RF Shielding and Test Accessories

ESCO Technologies' RF shielding and test accessories provide electromagnetic interference (EMI) shielding and testing solutions for various industries.

Thermal Management Solutions

ESCO Technologies' thermal management solutions provide heat sinks, thermal interfaces, and other thermal management products for various industries.

Filtronics and Custom Magnetics

ESCO Technologies' Filtronics and custom magnetics provide high-reliability, custom-designed magnetics and filters for various industries.

Aerospace and Defense Solutions

ESCO Technologies' aerospace and defense solutions provide advanced technologies and products for military and aerospace applications.

8. ESCO Technologies Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

ESCO Technologies Inc. operates in a niche market with limited substitutes, but the threat of substitutes is still present due to the evolving nature of the industry.

Bargaining Power Of Customers

ESCO Technologies Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products and services are often customized, making it difficult for customers to switch to alternative suppliers.

Bargaining Power Of Suppliers

ESCO Technologies Inc. relies on a few key suppliers for critical components, which gives them some bargaining power. However, the company's diversified supply chain and long-term relationships with suppliers mitigate this risk.

Threat Of New Entrants

The barriers to entry in ESCO Technologies Inc.'s markets are relatively high, including significant capital requirements, regulatory hurdles, and the need for specialized expertise. This limits the threat of new entrants.

Intensity Of Rivalry

ESCO Technologies Inc. operates in a highly competitive industry with several established players. The company must continually innovate and invest in research and development to maintain its market position.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	10.91%
Debt Cost	8.13%
Equity Weight	89.09%
Equity Cost	9.62%
WACC	9.46%
Leverage	12.25%

11. Quality Control: ESCO Technologies Inc. passed 5 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

ESCO Technologies

A-Score: 5.8/10

Value: 3.0

Growth: 7.7

Quality: 7.6

Yield: 0.0

Momentum: 9.0

Volatility: 7.3

1-Year Total Return ->

Teledyne Technologies

A-Score: 5.4/10

Value: 3.1

Growth: 6.3

Quality: 6.8

Yield: 0.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

Sanmina

A-Score: 4.9/10

Value: 4.2

Growth: 6.2

Quality: 5.7

Yield: 0.0

Momentum: 10.0

Volatility: 3.0

1-Year Total Return ->

Itron

A-Score: 4.5/10

Value: 5.4

Growth: 5.8

Quality: 7.1

Yield: 0.0

Momentum: 3.5

Volatility: 5.3

1-Year Total Return ->

Littelfuse

A-Score: 4.5/10

Value: 3.3

Growth: 4.2

Quality: 6.1

Yield: 1.0

Momentum: 6.0

Volatility: 6.3

1-Year Total Return ->

Plexus

A-Score: 4.2/10

Value: 4.0

Growth: 6.2

Quality: 5.5

Yield: 0.0

Momentum: 3.5

Volatility: 6.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

14.22%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.46%

ESCO Technologies Inc. - US2963151046

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ESE

1.c. Company Highlights

Less Volatile

Fairly Valued

Average Quality

Earnings Beats

Revenues Beats

Expensive

Earnings Miss

Revenues Miss

Stable Momentum

Better Quality

Medium Volatility

Strong Momentum

2. Strong Q4 2025 Results Propel ESCO Technologies to Record Performance

Guidance and Outlook for 2026

Segment Performance and Outlook

Valuation and Financial Health

Cash Flow and Debt Management

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.54%)

6. Segments

Aerospace and Defense

Expected Growth: 5.5%

Utility Solutions Group

Expected Growth: 5.8%

Test

Expected Growth: 5.2%

7. Detailed Products

Test and Measurement Solutions

Utility Solutions for Electric, Gas, and Water

RF Shielding and Test Accessories

Thermal Management Solutions

Filtronics and Custom Magnetics

Aerospace and Defense Solutions

8. ESCO Technologies Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: ESCO Technologies Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

238.88$

Current Price

238.88$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA