The stock of water solutions company (NYSE: PNR) is up more than 27% over the last year, but no one should think it hasn't had a wild ride over that time. The company's sales surged during the lockdowns as its consumer solutions sales boomed, only to come down again as lockdowns eased. That turbulence manifested in Pentair's stock performance over the last few years, but there are two reasons to believe the risk is on the upside for Pentair in the next couple of years. Here's why.

After having increased its dividend for the last 48 consecutive years, Pentair will join a select club of Dividend Kings if it keeps the run going to 2026. However, that's not the only essential event scheduled for that year. Pentair is in the throes of a transformational strategy to drive significant cost improvements, productivity gains, and price improvements that will increase return on sales (another way of describing operating profit margin) from 20.8% in 2023 to 24% in 2026.

That margin increase, accompanied by annual sales growth in the mid-single-digit range, will lead to low double-digit earnings-per-share growth and a cumulative free cash flow (FCF) of $2 billion. To put that figure into context, it represents 13.6% of Pentair's current market cap of $14.66 billion, and Wall Street analysts have Pentair generating almost $900 million in FCF in 2026 when the initiative is complete.

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Source Fool.com