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Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
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Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Valuation and assumptionsZebra's 2026 results are record-breaking, but a substantial portion of the improvement comes from one-time tariff recoveries and pricing actions rather than durable volume growth. The central tension is whether 5-7% organic growth is a structural floor or a cyclical peak.
The most severe risk is that organic growth decelerates below 3% as restocking fades, while memory costs remain elevated and cannot be fully offset by pricing. This would compress margins, reduce FCF, and likely trigger multiple compression.
At $350, the market is pricing in approximately 6-7% long-term organic growth with normalized FCF of ~$1.4bn, above management's >$1bn 2026 guidance. This implies a 16.7x forward P/E and a 6% FCF yield.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: Used to infer what growth and margin assumptions the current share price implies, revealing whether the market is more optimistic or pessimistic than the base case.
Zebra is a good business with a narrow moat, trading at a fair price. The base case intrinsic value of ~$345 is approximately equal to the current price. Expected 3-5 year returns of 8-11% annually are adequate but not exceptional.
Adjusted EBITDA margin: 23.5-24.0% guided for FY2026. A 200bp change shifts intrinsic value by ~$40 per share. Memory costs and pricing power are the swing factors.
The sensitivity of operating profit to changes in revenue when some operating costs are fixed.
In this report: Zebra's margin expansion depends on revenue growth outpacing fixed cost growth. The 2023 downturn showed negative operating leverage when revenue fell.
Free cash flow conversion: ~100% of non-GAAP net income. Strong conversion supports buybacks and balance sheet flexibility. A 10-point change shifts value by ~$25 per share.
Restocking reverses, organic growth falls to 0-2%, memory costs compress gross margin by 200bps, and operating deleverage cuts EBITDA margin to 20%. The market de-rates to 12x forward EPS of $17.
AI-enabled solutions gain rapid adoption, RFID and machine vision grow 15%+, Elo Touch synergies exceed expectations, and EBITDA margin expands to 26-27%. The market re-rates to 20x forward EPS.
Organic revenue growth by segment, reported quarterly. Sustained growth above 6% strengthens the thesis; below 3% weakens it.
Adjusted gross margin. Below 45% for two consecutive quarters would signal pricing power erosion and memory cost pressure.
Free cash flow. Full-year FCF above $1.2bn confirms strong cash generation; below $800m would raise concerns about earnings quality.
Memory cost trajectory. If the $120m headwind is not fully mitigated by pricing, margins will disappoint.
The company does not disclose recurring versus transactional revenue separately, customer churn rates, or segment-level operating margins. The precise return on the Elo Touch acquisition cannot be verified because Elo Touch standalone financials are not disclosed. The exact split of memory versus other component costs is not broken out.
These model scenarios depend on their inputs. Review the assumptions and supporting evidence alongside the implied values.
earnings multiple v2 · as of 2026-10-18
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