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Research history/VRT

VRT

Vertiv Holdings Co

Solid

Best-in-class data center power and thermal compounder with ROIC at 23.5% TTM and near-clean balance sheet, but 46.5x forward earnings after a 191% one-year run leaves limited margin of safety.

Researched 21 days ago

Earnings Jul 28· in 6 weeks

Solid
Conviction44
Upside36
Risk-adj0
Hold

Best-in-class data center power and thermal compounder with ROIC at 23.5% TTM and near-clean balance sheet, but 46.5x forward earnings after a 191% one-year run leaves limited margin of safety.

ScoresAnalyst DDAnalystSince lastRed flagsThesisConvictionQualityFinancialsValuationUpsideCycleCatalysts / RisksSizingRed-teamExpectationsFalsifiersSources

Recommendation

Hold

Not held — nothing to trim; not a buy at this price.

Recommendation

Hold

Conviction

44/100

solid

Upside

36/100

bull — · ~— odds · +— expected

Risk-adjusted upside

0/100

+-10% after downside pressure

Thesis quality

7.8/10

Opportunity

4.8/10

Risk pressure

8.5/10

Valuation

Expensive

AI fair value

$256.00

Fundamentals check

$283.09

Buy below

—

Trim above

$307.20

Implied expectations

achievable

23.4% implied revenue CAGR

Today's P/S implies ~23.4% revenue CAGR for five years versus 26.3% realized growth.

Since Last Research

Material changes

  • Stock declined further to $314.18 (-1.75% day) and is now 17.3% below 52W high vs -10.6% in prior report (2026-05-19 at $339.73). Entry is meaningfully improved but valuation still elevated at 46.5x forward P/E.
  • 52-week price return now +191.3% vs +252% in prior report, reflecting the continued pullback from the May 14 high of $379.94. Momentum cooling but still significant.
  • Fair value estimate maintained at $256/share; current price now ~23% premium to intrinsic value vs ~33% in prior report — margin of safety has improved but is still negative.
  • Analyst consensus broadly stable: 28 Buy/Strong Buy, 5 Hold, 1 Sell (May 2026) vs prior composition — directionally unchanged.
  • Q1 2026 operational metrics confirmed: ROIC TTM 23.53%, gross margin 37.73%, FCF margin 24.64%, EPS +136% YoY — execution remains strong.

Unchanged thesis elements

  • Verdict remains CONSIDER: full valuation limits conviction below HIGH_CONVICTION despite strong business quality and AI bottleneck positioning.
  • Primary AI thesis intact: rising rack power density structurally drives demand for Vertiv's liquid cooling and power systems.
  • Moat rating (narrow) unchanged: switching costs are real but multi-vendor hyperscaler programs prevent a wide designation.
  • Position sizing band (2-5%) unchanged: quality justifies meaningful exposure but premium valuation caps conviction.
  • Insider activity remains neutral: Code F and Code A transactions only, no discretionary open-market buying or selling.

Red flags

  • No Section 5 red flags (restatements, auditor changes, active SEC/DOJ investigations, going-concern language, negative gross margins, CFO/CEO turnover) identified in the packet.
  • Recent insider transactions are Code F (tax withholding on vesting) and Code A (awards) only — no discretionary open-market buying or selling; treated as neutral.
  • Stock now 17.3% below 52W high of $379.94 (2026-05-14), continuing pullback from prior report's -10.6% level. Macro driver not explained in packet; warrants monitoring.
  • At 46.5x forward earnings and ~23% premium to $256 intrinsic value estimate, much of the bull thesis is consensus-priced with limited margin of safety against multiple compression.

AI-Infrastructure Thesis Fit

Cooling / thermal managementPower & gridCloud / neocloud / hyperscaler infrastructureAI servers / hardware integration
Direct exposure8/10
Pricing power6/10
Defensibility7/10

Vertiv is a direct, high-exposure beneficiary of AI data center capex: rising rack power density (GPU clusters now 30-100kW per rack) structurally drives demand for liquid cooling and power distribution systems. Operating margin expanded from 3.3% (2021) to 17% (FY2025); ROIC accelerated from 2.7% to 23.5% TTM. Balance sheet at 0.18 net debt/equity. Q1 2026 EPS +136% YoY confirms execution. Defensibility is solid via installed-base service contracts and hyperscaler qualification lock-in; Eaton and Schneider compete across every line. Thesis is sound; constraint is entry price after a 191% one-year run.

Business Quality

Description

Vertiv designs, manufactures, and services critical digital infrastructure for data centers, communication networks, and commercial/industrial environments — power management, thermal management (including liquid cooling), and integrated rack systems.

Value Chain

Tier-1 infrastructure component supplier sitting between utility/grid inputs and hyperscaler/colocation data center operators; provides both equipment and lifecycle service.

Moat

narrow

Switching costs via large installed base and multi-year service contracts; hyperscaler qualification processes create lock-in. However, Eaton and Schneider Electric compete head-to-head across power and thermal lines, limiting pricing power and preventing a wide-moat designation.

Pricing Power

moderate

Gross margin expanded from 30.5% (2021) to 37.15% TTM and operating margin from 3.3% to 17% over the same period, indicating real pricing power on AI-driven SKUs. Competitive intensity with EMR and Schneider caps upside; pricing power is real but not dominant.

Customer Concentration

Not disclosed in packet. Hyperscaler concentration is a sector-wide structural risk; specific top-customer percentages not available.

Financial Health

MetricValue
Revenue growth YoY29.50%
Gross margin37.15% ↑
Operating margin17.03%
FCF margin18.45%
Cash position2501000000
Net debt / EBITDA0.35
Share count change YoY—
ROIC23.53%

Valuation

Forward P/E

46.55

Trailing P/E

61.74

PEG

1.28

EV/EBITDA

45.18

P/S

8.87

Sector: premiumHistory: above_average
PeerMetricValue
EMREV/EBITDA approx sector range15-20x
AMEEV/EBITDA approx sector range20-25x
VRTEV/EBITDA TTM45.2x
VRTP/S TTM8.9x
VRTP/E TTM61.7x

Cycle Position

YTD

—

1Y

191.27%

Vs sector

—

From 52w high

-17.31%

Valuation: richerAnalysts: net_upgradesInsiders: neutral

Catalysts & Risks

Near-term catalysts

  • Q2 2026 earnings — continuation of margin expansion and AI orderbook growth
  • Hyperscaler 2026/2027 capex guidance updates
  • Further liquid cooling design wins as GPU rack density rises

Medium-term catalysts

  • Sustained AI data center buildout through 2027
  • Expansion of high-density liquid cooling installed base and attached recurring service revenue
  • Continued deleveraging toward net-cash position freeing capital for buybacks or tuck-in M&A
RiskSeverityExplanation
Valuation compression risk at 46.5x forward P/EhighAfter a 191% one-year run, much of the AI bull thesis is consensus-priced. Any deceleration in hyperscaler capex or margin expansion could trigger sharp multiple compression.
Competitive pressure from Eaton and Schneider ElectricmediumBoth peers compete directly across power and thermal product lines. Multi-vendor hyperscaler programs prevent winner-take-all dynamics and cap pricing power upside.
Hyperscaler customer concentration and capex cyclicalitymediumData center capex is cyclical and concentrated among a handful of hyperscalers. A pause in AI infrastructure spending would hit VRT disproportionately given direct exposure.
Stock momentum risk — high beta (2.07)mediumBeta of 2.07 implies VRT moves ~2x the market. The 191% one-year gain reflects momentum that can reverse rapidly in risk-off environments.

Position Sizing

2%–5%

CONSIDER at high quality: narrow moat with switching costs, clear AI bottleneck fit, expanding margins (ROIC 23.5%), and near-debt-free balance sheet justify meaningful exposure. The 17.3% pullback from the May 14 high improves entry, but 46.5x forward earnings, 191% one-year run, and ~23% premium to fair value cap sizing below HIGH_CONVICTION and argue for the mid-range of the 2-5% band.

Sources

ClaimSourceURLRetrieved
Current price $314.18, -1.75% dayfinnhub:quote—as of 2026-05-28 · retrieved 2026-05-28T20:36:22.326Z
Market cap $123.9B, 384.11M shares outstanding, NYSE listing, Electrical Equipment industryfinnhub:profileLinkretrieved 2026-05-28T20:36:21.163Z
Forward P/E 46.55, PEG 1.28, beta 2.07, 52W high $379.94 (2026-05-14), 52W low $104.71finnhub:basic-financials—retrieved 2026-05-28T20:36:21.179Z
TTM EV/EBITDA 59.59 (annual basis 32.5); quarterly TTM EV/EBITDA 45.18 as of Q1 2026finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
Gross margin TTM 37.15%; Q1 2026 gross margin 37.73% vs 33.72% Q1 2025finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
Operating margin FY2025 17.03% (vs 3.33% in 2021); Q1 2026 16.54%finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
FCF margin FY2025 18.45%, Q1 2026 24.64%finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
ROIC TTM 23.53% (Q1 2026), up from 19.44% FY2025 and 9.25% FY2024finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
Net debt/equity 0.18 (Q1 2026), down from 0.30 (FY2025) and 0.70 (FY2024)finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
EPS TTM $3.98; Q1 2026 EPS $0.9948 vs $0.4217 Q1 2025 (+136% YoY)finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
Sales per share Q1 2026 $6.76 vs $5.22 Q1 2025 (+29.5% YoY)finnhub:basic-financials—as of 2026-03-31 · retrieved 2026-05-28T20:36:21.179Z
52-week price return +191.27%finnhub:basic-financials—as of 2026-05-28 · retrieved 2026-05-28T20:36:21.179Z
Analyst recommendations May 2026: 7 Strong Buy, 21 Buy, 5 Hold, 1 Sellfinnhub:recommendations—as of 2026-05-01 · retrieved 2026-05-28T20:36:22.187Z
Recent insider transactions are tax-withholding (Code F) and award (Code A) only; no discretionary open-market activityfinnhub:insider-transactions—as of 2026-05-06 · retrieved 2026-05-28T20:36:21.452Z
Peers include EMR, AME, ROK, HUBB, NXT, GNRCfinnhub:peers—retrieved 2026-05-28T20:36:22.326Z
Recent 10-Q filed 2026-04-22; 8-K filings 2026-04-27, 2026-04-22, 2026-04-13sec:recent-filingsLinkas of 2026-04-27 · retrieved 2026-05-28T20:36:21.299Z
Macro context: 10Y Treasury 4.48%, Fed Funds 3.62% as of 2026-05-27fred:macro-snapshot—as of 2026-05-27 · retrieved 2026-05-28T20:36:21.501Z