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Legence (LGN): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q2 2026, to Jun 30, 2026, filed Aug 13, 2026; rules v1.1
Legence (LGN): 2 rules of 10 triggered on the filings to Jun 30, 2026: adjusted profit = economic profit; FCF growth = the business improved. 1 to review; 4 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Adjusted profit = economic profit Triggered · severity high · confidence low
Adjusted EPS was at least 10% above GAAP in 3 of the last 3 quarters (on average 221% above). Costs excluded every quarter (restructuring, stock compensation, amortisation of acquired intangibles, litigation) are a recurring cost of the business, not a one-off.
Innocent reading: A genuine one-off this year (an impairment, a settlement) that happens to span several quarters.
FCF growth = the business improved Triggered · severity medium · confidence medium
Free cash flow rose $209M (+2034%), from $10M to $219M, but working capital released $165M more cash than the year before: 79% of the increase came from sources that need not repeat. Operating cash flow before working capital rose by $63M.
Innocent reading: An expansion programme finished, so capex fell back to maintenance levels for good.
A precise DCF value = the true value To review · confidence high
The DCF's point value is -8.50 a share (price 28.29); 80% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from -42.98 to 20.32; across every method the research ran the range is -94 to 470. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Triggered severity medium · confidence medium
Free cash flow rose $209M (+2034%), from $10M to $219M, but working capital released $165M more cash than the year before: 79% of the increase came from sources that need not repeat. Operating cash flow before working capital rose by $63M.
The figures and how they are read
| Fiscal year before | FY2024 |
| Fiscal year | FY2025 |
| Operating cash flow, year before | $29M |
| Operating cash flow | $257M |
| Capex, year before | $19M |
| Capex | $38M |
| Free cash flow, year before | $10M |
| Free cash flow | $219M |
| Change in FCF | $209M |
| Change in capex | $19M |
| Working capital: change in its cash contribution | $165M |
| Of which: capex cut | 0.00 |
| Of which: working capital released | $165M |
| Share of the increase that need not repeat | +79.0% |
| Operating cash flow before working capital: change | 62719000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY2025 (cash flow statement, fiscal year) · FY2024 (cash flow statement, fiscal year before)
What would explain it innocently
- An expansion programme finished, so capex fell back to maintenance levels for good
- Suppliers agreed longer payment terms in a contract
- Inventory was brought down after a glut and will stay down
What to look for in the filing
- Maintenance capex (what it costs to keep the assets working)
- Supplier payment terms and any supply-chain financing
- Management's capex guidance for next year
What would show the trap does not apply
- Next year's FCF holds or rises with capex back at its earlier level and working capital no longer releasing cash
- The 10-K's capex guidance and the segment capex show the cut is a completed programme, not deferral
- The working-capital release matches a disclosed change in terms or a divestiture, not stretched payables or a collection push
Look again: next filing.
A07 Stock compensation added back = no economic cost Insufficient data
fewer than two fiscal years of stock compensation and share counts on file
B02 Receivables growing = future cash is certain Insufficient data
no quarter a year earlier to compare the last two quarters with
B08 Adjusted profit = economic profit Triggered severity high · confidence low
Adjusted EPS was at least 10% above GAAP in 3 of the last 3 quarters (on average 221% above). Costs excluded every quarter (restructuring, stock compensation, amortisation of acquired intangibles, litigation) are a recurring cost of the business, not a one-off.
The figures and how they are read
| Quarter / adjusted EPS / GAAP EPS / gap | 2025-12-31 / 0.2348 / -0.57 / 3.428; 2026-03-31 / 0.2934 / 0.13 / 0.557; 2026-06-30 / 0.2245 / -0.37 / 2.648 |
| Quarters with adjusted ≥ 10% above GAAP | 3 |
| Quarters compared | 3 |
| Latest gap | +264.8% |
the analysts' 'actual' (usually the company's adjusted EPS) against GAAP net income ÷ diluted shares for the matching quarter; a gap of 10% or more counts (the stand-in until three releases' reconciliation tables are on file)
Source: 2025-12-31 (adjusted 0.23 vs GAAP -0.57) · 2026-03-31 (adjusted 0.29 vs GAAP 0.13) · 2026-06-30 (adjusted 0.22 vs GAAP -0.37)
What would explain it innocently
- A genuine one-off this year (an impairment, a settlement) that happens to span several quarters
- Amortisation of acquired intangibles, which many investors also exclude by choice
- The analysts' 'actual' is not the company's own adjusted figure
What to look for in the filing
- The reconciliation table in the earnings release: which items, how much, how often
- Whether the same items were excluded in earlier years
What would show the trap does not apply
- The reconciliation shows the excluded items ending (a restructuring with its final charge, a settlement paid) and the gap to GAAP closes in the next quarters
- The excluded items are only amortisation of acquired intangibles and the cash paid for the deals is in the investing cash flow
Look again: next filing.
C02 Low net debt = no refinancing risk Not triggered confidence medium
$13M comes due within a year, 47.5× covered by cash and investments of $292M plus $323M of free cash flow.
The figures and how they are read
| Cash and investments | $292M |
| Debt | $1.0B |
| Net debt | $749M |
| Due within a year | $13M |
| Read from | the debt maturity table |
| Free cash flow, twelve months | $323M |
| Cash plus free cash flow | $615M |
| Coverage of what is due | 47.5 |
| Due in the second year | $19M |
| Balance sheet date | 2026-06-30 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY2025 (debt maturities, cash and investments)
D03 EPS growth = profit growth Insufficient data
no quarter with EPS, net income and diluted shares for both this year and last
E02 Low P/E at a cyclical peak = undervalued Insufficient data
3 fiscal years of net income on file; a cycle needs five
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is -8.50 a share (price 28.29); 80% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from -42.98 to 20.32; across every method the research ran the range is -94 to 470. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | -8.50 |
| price | 28.29 |
| terminal value share | +80.5% |
| swing by input | Operating margin / ±3 pts / -42.98 / 20.32; Working capital per $ of growth / ±10 pts / -15.91 / -1.09; Capex (share of revenue) / ±1 pt / -12.48 / -4.52; WACC / ±1 pt / -9.31 / -7.47 |
| range all methods | -93.66; 470.34 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Legence: cash flow →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.