Is Worthington Enterprises (WOR) a Buy at a 20-24% Discount to Fair Value?

The stock of Worthington Enterprises (WOR) currently trades at $52.38 as of December 19, 2025, representing a 20-24% discount to the latest fair value estimate of $69. This valuation dislocation raises critical questions for investors: Is the discount justified by lingering market risks, or does it reflect an undervaluation of the company's strategic transformation and earnings growth potential? A closer examination of WOR's financial performance, operational initiatives, and industry dynamics offers clarity.

Strategic Transformation: Fueling Growth Amid Industry Headwinds

Worthington Enterprises has embarked on an aggressive strategic transformation, leveraging acquisitions, innovation, and operational efficiency to drive long-term value. The recent acquisition of LSI Group for $205 million, expected to close in January 2026, underscores the company's focus on expanding its footprint in niche markets such as commercial metal roofing components. This move aligns with CEO Joe Hayek's vision of combining organic growth with strategic acquisitions to enhance profitability and market share.

The company's Q2 FY2026 results highlight the effectiveness of this strategy. Revenue surged 19% year-over-year to $327.5 million, driven by strong performance in the Building Products segment and contributions from prior acquisitions like Elgen. Adjusted EBITDA grew 8% to $60.5 million, while free cash flow improved 15% to $39.1 million. These metrics suggest that Worthington's strategic initiatives are not only stabilizing its core operations but also creating a foundation for sustained growth.

Earnings Growth and Financial Resilience

Despite macroeconomic challenges-such as fluctuating steel prices and trade uncertainties-Worthington has demonstrated resilience. For the trailing 12 months, adjusted EBITDA reached $284 million, reflecting a significant improvement in profitability. The company's ability to expand margins, even in a volatile environment, is a testament to its operational discipline.

Analysts project further upside. A 12-month price target of $61.00 is the average across brokerages, with Canaccord Genuity Group offering a more bullish $69.00 estimate based on market analysis. These forecasts hinge on Worthington's capacity to capitalize on new partnerships, product launches, and its expanding portfolio of high-margin products. The recent 18.03% revenue growth rate as of August 2025 further reinforces confidence in the company's ability to outperform peers.

Valuation Dislocation: Opportunity or Risk?

The current discount to fair value appears to reflect market skepticism about near-term margin pressures and broader industry headwinds. Steel price volatility and construction sector slowdowns remain risks that could temper earnings growth. However, the gap between intrinsic value estimates ($69) and the market price ($52.38) suggests that these risks are already priced in, potentially offering a margin of safety for long-term investors.

Worthington's strategic transformation-marked by disciplined acquisitions and innovation-positions it to outperform in the medium to long term. The company's focus on high-growth segments, such as building and consumer products, aligns with secular trends in infrastructure and housing demand. Additionally, its robust free cash flow generation of $39.1 million in Q2 FY2026 provides flexibility to reinvest in growth or return capital to shareholders.

Risks to Consider

Investors must weigh the company's growth narrative against potential challenges. Steel price fluctuations, which directly impact input costs, could compress margins if not offset by pricing power. Similarly, geopolitical trade tensions and economic slowdowns in key markets may dampen demand for construction-related products. While Worthington has shown resilience in navigating these headwinds, their persistence could delay the realization of full valuation potential.

Conclusion: A Compelling Case for a Buy

The 20-24% discount to fair value appears to represent an attractive entry point for investors who can tolerate short-term volatility. Worthington's strategic transformation, supported by strong earnings growth and a disciplined capital allocation approach, positions it to deliver value over the next 12–24 months. While risks remain, the company's operational strengths and growth trajectory suggest that the current valuation dislocation is more a reflection of macroeconomic caution than a fundamental flaw in its business model.

For those aligned with a long-term horizon, WOR offers a compelling opportunity to participate in a company that is not only adapting to industry challenges but actively reshaping its future.