AOS Fair Value Estimate
$64.230.2% overvalued
Blended fair value estimate based on DCF, Graham Number, and earnings-based models.
A.O. Smith Corp
Exchange: NYSESector: IndustrialsIndustry: Specialty Industrial Machinery
A. O. Smith Corporation manufactures and markets water heaters and boilers to the residential and commercial end markets primarily in the United States, Canada, China, Europe, India, and the Middle East. It operates in two segments, North America and Rest of World. The company offers electric, natural gas, gas tankless, and liquid propane model water heaters, as well as solar tank units for applications in residences, restaurants, hotels and motels, laundries, car washes, and small businesses; and residential boilers, as well as commercial boilers primarily for space heating applications in hospitals, schools, hotels, and other large commercial buildings. It also provides expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, and related products and parts. The company sells its products through independent wholesale plumbing distributors, hardware and home center chains, and manufacturer representative firms. It sells water heaters to approximately 7,000 retail outlets, as well as water treatment products to 4,500 retail outlets in China. The company is headquartered in Milwaukee, Wisconsin.
Did you know?
AOS's revenue grew at a 4.2% CAGR over the last 6 years.
Current Price
$64.35
-1.12%GoodMoat Value
$64.23
0.2% overvaluedProfile
Valuation (TTM)
Market Cap$8.96B
P/E16.40
EV$9.06B
P/B4.82
Shares Out139.24M
P/Sales2.34
Revenue$3.83B
EV/EBITDA11.01
A.O. Smith Corp (AOS) Valuation
GoodMoat Analysis
A.O. Smith appears fairly valued relative to its quality, offering a marginal margin of safety. The current price is slightly above the GoodMoat Target, and its P/E is modestly below its sector, but not at a compelling discount.
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Based on the GoodMoat Investment Framework, the valuation assessment for A.O. Smith is marginal. The primary DCF analysis indicates a minimal margin of safety; the current price of $66.9 is 4.2% above the GoodMoat Target of $64.23, placing it just outside the 'Favourable' band (which requires a 20-40% discount) and into the 'Marginal' 10-20% range. From a multiple perspective, the forward P/E of 17.1x is below the sector average for industrials, which is a positive, but it is not at a decade-low level that would signal deep value. The stock's quality indicators, such as a strong ROE of 29.4% and a robust operating margin of 19.0%, support a premium, but the lack of revenue growth visibility tempers the case for a high-growth multiple. The 5.9% FCF yield is attractive but not exceptional for a value-oriented entry point. Overall, the valuation is not unfavourable but lacks the significant discount that provides a wide margin of safety for a value investor. The stock appears priced for its steady, profitable performance without a clear catalyst for re-rating. Analysis based on data as of 2024-05-15.
AOS Valuation Metrics
FCF$546.00M
FCF Growth Rate5.69%
EPS Growth (CAGR)5.69%
WACC10.00%
Fair Value Models
Graham Number, PEG-based, and Earnings-based models
View Fair Value →AOS Valuation & Fair Value Analysis
A.O. Smith Corp (AOS) valuation analysis using multiple fair value methodologies. GoodMoat calculates a blended fair value target using discounted cash flow (DCF) analysis, the Graham Number, and earnings-based valuation models.
The GoodMoat Fair Value target for A.O. Smith Corp is $64.23. The current stock price is $64.35, suggesting the stock is 0.2% overvalued.
The price-to-earnings (P/E) ratio is 16.40. Price-to-book ratio is 4.82. Price-to-sales ratio is 2.34. Enterprise value to EBITDA is 11.01. PEG ratio is 0.82.
GoodMoat's valuation models include the Graham Number (based on EPS and book value), an earnings-based model (discounted future EPS), and a PEG-adjusted valuation. The three models are averaged to produce a blended fair value estimate. Use these tools alongside the DCF calculator and reverse DCF to form a comprehensive view of A.O. Smith Corp's intrinsic value.