WATER IS THE VERY STUFF OF LIFE, VITAL TO all creatures. And it also might have a property that would interest ITT shareholders: the potential to help boost the company’s stock price.

The White Plains, N.Y., outfit, whose shares (ITT) have been held down by the discount the market often applies to companies perceived as defense conglomerates, is the worldwide leader in pumps, which its CEO, Steven Loranger, says account for $50 billion of the revenue in the $425 billion global water-infrastructure market. Pumps aren’t high-margin products, but ITT’s position in that market reflects the company’s aim of boosting its commercial operations, which generally are more profitable than those tied to the military.

Nearly 60%, or $6.3 billion, of ITT’s $10.9 billion in revenue last year came from its defense segment. But this segment also includes products and services for cyber security, air-traffic control, space-based weather-forecasting and other non-defense applications that account for about 25% of its business. Indeed, one of ITT’s satellite-imaging technologies underlies Google Earth.

ITT’s actual defense products run the gamut from electronic-warfare systems for ground-, air- and sea-based weapons, to night-vision goggles for soldiers, to jamming gear to protect troops against improvised explosive devices.

LORANGER IS TRYING TO PARLAY defense technologies into commercial applications, to tap into what he calls “a wonderful macroeconomic trend related to resource scarcity, environmental sustainability and aging infrastructure.” If he succeeds in enriching his company’s business mix, the stock price will kick into overdrive, predicts Nicholas Heymann, an analyst with Sterne Agee in New York, who rates ITT a Buy.

The shares could use some help. They’ve risen about 35%, from 39 to about 53, over the past year, a span in which the S&P 500 has jumped 41%. ITT now is trading at about 12.9 times the $4.06 that it is likely to earn this year.

Should the price/earnings multiple return to its five-year average of 17, the shares could surge 40%. And even a 15 multiple on next year’s expected $4.50 in profit would get them near $68 in 12 to 18 months, says Don Wordell, who runs the Ridgeworth Mid-Cap Value Equity Fund. The portfolio manager, who thinks that such multiple expansion is achievable, has been bolstering his ITT stake.

One of CEO Loranger’s goals is to increase annual revenue to the range from $17 billion to $20 billion over the next five years, while boosting earnings 10% to 15% annually over that span. Some analysts have suggested that, to reach those results, the company will have to sell some defense units and buy more non-military businesses. Loranger won’t comment on that possibility.

While some of the expected growth will be internal, Sterne Agee’s Heymann calls mergers and acquisitions “the alpha unlocker now.” ITT recently spent $390 million to buy Nova Analytics, which operates in the high-margin, $6 billion market for analytical instruments in water, wastewater, industrial process, and food and beverages. Monitoring of these systems should help drive sales of replacement parts, which represent about 45% of ITT’s water-related sales.

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