Pershing Square Challenge 2026 finalists on MSA Safety: a hidden quality compounder? $MSA

Summary

• The thesis: MSA Safety is a century-plus-old “OG quality pick-and-shovel” worker-safety business with relatively low expectations embedded in the stock. At the episode’s mid-June 2026 reference point, Andrew described the stock at ~$160 against his rough ~$8 EPS estimate (~20x). The team’s reverse DCF assumes just 3% revenue growth and no margin expansion; its base case assumes 7% growth and a 22x projected multiple, reaching $350/share by 2030 — more than a double in roughly 4 years.
• The detection story is a shift from standalone “beep-beep” devices to connected hardware plus subscription software. Bob’s framing: MSA “put the canary in the coal mine out of business,” and now “the canary can sing to a wider audience,” alerting nearby workers and centralized supervision software. With roughly 500,000 devices sold and about 450,000 still unconnected, the replacement runway is long, while MSA Plus can improve revenue steadiness, device-lifetime revenue and margins.
• A rare natural experiment supports the model: Blackline Safety, the pure-play connected first mover, recently got taken private. EJ argued that this indicates at least one private-equity firm sees the connected model returning value within a typical 5-to-7-year holding period. He suggested Blackline’s need to monetize through pricing could benefit MSA, which has the installed base, more durable hardware and is the only company in the industry that manufactures its own sensors.
• The fire-service leg rests on a legally mandated SCBA replacement cycle every 10–15 years that consensus treats as potential upside rather than a certainty. MSA’s G1 was rebuilt from the ground up in 2014 while conglomerate peers “just made small patches.” The team argues newer sell-side coverage underappreciates the upcoming cycle, and Craig’s tier map suggests Tier 1 wins can lead surrounding Tier 2 and Tier 3 departments to follow through shared testing and interoperability.
• Andrew’s core pushback: at roughly 20x with mid-single-digit guided growth, “I don’t get hit in the face with alpha.” The team’s answer is timing and management conservatism: the connected-worker and replacement-cycle theses are expected to develop across 2027–2030, with a J-curve from slight early negative impacts to later benefits. EJ’s view was that “not much has to go well for our base case to necessarily play out.”
• Capital allocation may have improved after the 2023 product-liabilities divestiture, which EJ framed as removing a 17%-of-EBIT annual “litigation tax” previously thrown out at 0% ROIC. Alongside a modeled R&D step-up, the team cited more than five decades of dividend growth, with no reason in its view to expect that to stop, a $500 million largest-ever buyback announced at the beginning of the year, and a projected ROIC path from the high teens into the low 20s.
• Process notes worth stealing: the team screened for under-followed quality — only eight analysts covered MSA — and used Reddit’s r/firefighting and MSA’s job board as confirmatory rather than thesis-driving evidence. The job-board work complemented management’s datapoint that software engineers had risen from “barely any” four or five years earlier to 40% of engineering staff.

Deep dive

1. Stock-picking as tournament strategy: under-followed, simple, unbiased

• The team — Columbia Business School teammates EJ Karobath, Craig Larkin and Bob McGrane, and Pershing Square Challenge finalists — each independently screened for quality and growth characteristics, including ROIC, ROIC growth, revenue growth, healthy margins and a market-cap ceiling. The goal was to avoid names “everybody already knows and has strong opinions about,” so they could learn the business and “approach it from an unbiased perspective.”
• EJ’s edge argument: reading the 10-Ks revealed “so much discrepancy between what the real story behind this company is and what is superficially glanceable based on their disclosure” — including the subscription shift in portable detection and “very tricky-to-model replacement cycles for SCBAs.” With only eight covering analysts: “at worst we would be one of the top 11 people to understand this company from the outside.”
• Andrew’s tactical appreciation: a complex industrial company can make judges spend the pitch decoding the business; “they sell safety equipment” is graspable in seconds, without many preconceived notions attached.

2. Detection: the canary learns to sing to a wider audience

• The business is an “OG quality pick-and-shovel” worker-safety company with more than a century of experience, a roughly two-thirds U.S./one-third international revenue split and three segments: detection, fire service and fall protection. Detection includes fixed and portable gas detection; fire service includes SCBAs and protective gear. Detection is the fastest-growing segment, and detection plus fire service represent about 70% of the product mix.
• Bob’s signature framing: MSA “put the canary in the coal mine out of business,” and now “the canary can sing to a wider audience.” Connected portable detectors still alert the wearer, but also notify nearby workers and centralized supervision software, enabling faster aid, selective factory shutdowns and automated incident reporting. For MSA, the connected service means “steadier revenue and more revenue over the lifespan of a typical device” at higher margins.
• Craig cautioned against treating the hardware as commoditized: “One of the biggest obstacles to adopting the connected variant is just MSA’s current non-connected devices work so well.” MSA Plus builds on that product advantage across roughly 500,000 devices sold, about 450,000 of them still unconnected.
• Bob’s hardware-stack argument: MSA is “the only ones in the entire industry that manufacture their own sensors,” allowing it to innovate the devices faster than competitors that are behind on hardware and have lower margins. Field feedback suggested that if a Blackline device is dropped, “it’s probably breaking,” while MSA devices are more durable.

3. Blackline’s take-private as a natural experiment

• EJ’s argument: “In investing and economics, you rarely have the conditions to have a purely controlled experiment and here I would say we have one.” Blackline, the pure-play connected-detection first mover, was taken private — which EJ viewed as evidence that at least one private-equity firm sees the connected model returning value within a typical 5-to-7-year holding period.
• EJ suggested Blackline’s lack of MSA’s installed base could translate into pricing power: “Blackline would have to return value through pricing,” which he said could benefit MSA. Layered on top is a halo effect — customers may be more willing to try MSA’s connected products because of its decades-long, arguably century-long reputation for hardware quality.

4. Fire service: a mandated replacement cycle the market treats as optional

• Craig’s setup: MSA’s leading G1 SCBA “underwent a ground-up rebuild in 2014,” while “conglomerate-owned peers just made small patches and fixes to existing architectures.” SCBAs are legally mandated to be replaced every 10–15 years, creating a share-switch opportunity because departments are typically reluctant to change brands without replacing an entire fleet.
• The team’s mispricing claim: management discusses the upcoming cycle conservatively — “this might create some upside” — just as it did around the 2014–2018 cycle. Newer sell-side coverage “doesn’t fully appreciate that this cycle is happening,” while longer-tenured analysts give MSA more credit. Consensus treats both MSA Plus subscription revenue and the replacement cycle as a call option or potential upside rather than something certain to occur.
• Unmodeled upside: FireGrid, MSA’s connected SCBA variant, was implemented by the London Fire Brigade and is now with the Los Angeles Consortium of Fire Departments. The team deliberately left this software opportunity out of its base case.

5. Valuation and Andrew’s “where’s the alpha?” pushback

• The base case assumes roughly 7% revenue growth from detection outperformance and fire service, plus a 22x projected multiple. That is broadly consistent with MSA’s average trading multiple, even though the company was described as trading at a historical discount to next-12-month P/E. The result is approximately $350/share by 2030 against Andrew’s roughly $160 mid-June 2026 reference price.
• Bob’s reverse-DCF point: the current price implies only 3% revenue growth and no margin expansion, without credit for historical outperformance or the possibility that the connected-worker shift improves margins and accelerates revenue.
• Andrew’s honest challenge: citing the CFO’s mid-single-digit growth outlook, including low-single-digit growth in the first half, he framed the stock as roughly 20x on his ~$8 EPS estimate and said, “it doesn’t scream alpha… I’m not getting hit over the head with the thing the market is just completely missing.” Is the market overlooking a 2028 growth cycle, or is it simply saying, “nice business, this is about right”? He said he did not know.
• Bob’s timing response: “this is probably better for a patient investor.” The connected-worker revolution and replacement cycle “aren’t going to happen next year”; the thesis points have a “very slight negative impact in the early years” and then rebound in a J-curve through 2027–2030. EJ, who studied at the University of Chicago and said he would “never claim that the market isn’t efficient,” argued that “not much has to go well for our base case to necessarily play out.”

6. Primary research, the tier-1 halo map and capital allocation

• On Reddit’s r/firefighting and job-board research, Craig’s method was “a way to reinforce what we were hearing… rather than driving our entire viewpoint.” Reddit discussions about firefighters preferring MSA’s SCBA were checked against conversations with firefighters, including a Cal Fire contact who might use Scott SCBA but had access to and experience with MSA’s and believed MSA’s was better and differentiated.
• EJ connected the job-board search to management’s datapoint that four or five years earlier “barely any” engineers were software engineers, versus 40% today. He called this evidence that MSA is “very much turning into sort of a tech company and it should be priced as such,” while acknowledging that as a parenthetical aside.
• Craig’s tier-map logic, answering Andrew’s why-wouldn’t-3M-just-compete question: firefighters use SCBAs daily, so competition is on functionality and interoperability, not simply price. Large-city departments conduct extensive testing; surrounding departments “piggyback on that testing” and want interoperable equipment when fighting fires in the same area. Andrew’s Kenner/New Orleans hypothetical was affirmed as a genuine safety consideration because firefighters can cover large geographies and be pulled from many departments for major fires.
• EJ’s closing thesis point: following the 2023 product-liabilities divestiture, he described a former annual “litigation tax of 17%” of EBIT — money “being thrown out at 0% ROIC” — as no longer consuming that capital. Alongside a modeled R&D step-up, the team cited projected ROIC moving from the high teens into the low 20s, more than five decades of dividend growth with no reason in its view to expect it to stop, and a $500 million largest-ever buyback announced at the beginning of the year. EJ saw this as a step-up in MSA’s competence “as capital allocators, and not only as operators.”