As demand for energy-efficient infrastructure rises, thermal management systems are becoming increasingly critical across data centers and other mission-critical facilities. Trane Technologies (TT) has spent the past several years transforming itself into a pure-play thermal solutions provider to capitalize on these trends. In today’s FA Alpha Daily, we examine why traditional metrics may be understating Trane’s profitability and what that could mean for investors.
FA Alpha Daily
Powered by Valens Research
America’s data center buildout is accelerating demand for specialized cooling solutions.
Data centers and the advanced servers and chips housed inside them expend heat at an enormous scale daily. Due to the amount of heat generated, between 7% to 30% of all the electricity in these facilities are dedicated to cooling systems alone.
With cooling solutions playing a crucial role in data center operations, thermal solutions firms have benefitted from increased demand for their services.
Trane Technologies (TT) is another example of a data center boom beneficiary.
The company is a pure-play thermal solutions firm that specializes in heating, ventilation, and air conditioning (“HVAC”) and transport refrigeration systems for residential, commercial, industrial, medical, and logistical applications.
Trane historically operated an industrial segment as well, but spun this business off in 2020 in order to focus solely on thermal solutions.
Today, the company operates two major business units. Trane specializes in HVAC solutions for residential, commercial, and industrial customers. Meanwhile, Thermo King specializes in transport refrigeration systems for food, medicine, and essential goods.
The company operates brands under Life Science Solutions, which provides end-to-end solutions for health and life science clients, and Data Center Solutions, which caters to data center customers.
Beyond relying on those business segments, Trane Technologies has bolstered its business through acquisitions.
Notable acquisitions include LiquidStack, a company specializing in liquid cooling solutions for data centers, acquired earlier this year, and Stellar Energy Americas, a provider of data center cooling solutions, whose acquisition was announced late last year and completed in February.
Global demand for energy-efficient solutions and buildings as well as rising data center buildouts enabled the company to post revenues of $21 billion last year, a 7% year-over-year increase. The company now also boasts a record backlog of $10 billion, driven by its commercial HVAC business.
Yet despite being a strong performer after transitioning to a pure-play thermal solutions provider, investors continue to underestimate just how profitable Trane Technologies is.
Since 2020, the company’s as-reported return on assets (“ROA”) has climbed from 5% in 2020 to 12% in 2025.
However, when seen through the lens of Uniform Accounting, the improvement in Trane Technologies’ business far exceeds what as-reported metrics have reported.
Trane Technologies’ Uniform ROA has climbed steadily from 19% in 2020 to 35% in 2025—well above the 12% corporate average.
As-reported metrics hide just how profitable Trane Technologies is. Trane Technologies is an above-average business benefitting from strong tailwinds today.
As the company continues to grow its backlog amid today’s demand environment, the company’s true economic reality should continue to outpace what the market is giving Trane credit for today.
The market’s misunderstanding of Trane’s true profitability could create an investment opportunity for this company.
Best regards,
Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research
Today’s analysis highlights the same insights we share with our FA Alpha Members. If you want to an get in-depth analysis of market trends and uncover undervalued stocks, become an FA Alpha Member today.