Smith A O Corp (AOS) stock analysis

P/E below its 5-year median

Smith A O's P/E of 17.9 is below its own 5-year median of 19.8.

P/E below the industry

Smith A O's P/E of 17.9 is below the Electronic and Other Electrical Equipment and Components, except Computer Equipment median of 31.8.

EV/EBITDA below its 5-year median

Smith A O's EV/EBITDA of 11.9 is below its 5-year median of 13.4.

P/B above the industry

Smith A O's price-to-book of 4.73 is above the Electronic and Other Electrical Equipment and Components, except Computer Equipment median of 2.90.

Trading below fair value

The share price of $64.24 is below our fair value estimate of $84.16.

Margin of safety over 20%

The price is 23.7% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 0.7% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 36.6% a year over the last three fiscal years.

Earnings growth not accelerating

Net income grew -6.8% over the last twelve months, against a 5-year average of 9.6% a year.

Growing slower than the industry

Revenue grew -0.7% over the last twelve months; the Electronic and Other Electrical Equipment and Components, except Computer Equipment median is -0.2%.

Guidance lowered

Smith A O lowered its 2026 Outlook Net sales outlook on Jul 30, 2026.

Gross margin improving

Gross margin was 38.6% over the last twelve months, against 38.5% a year earlier.

Return on equity over 15%

Return on equity was 27.0% over the last twelve months and averaged 25.7% over five years.

Return on capital over 10%

Return on invested capital was 25.0%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Smith A O's return on equity of 27.0% is above the Electronic and Other Electrical Equipment and Components, except Computer Equipment median of -3.3%.

Earnings grew over 5 years

Net income grew 9.6% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 13.0% over the last twelve months, against a 5-year average of 12.5%.

Net margin above the industry

Smith A O's net margin of 13.0% is above the Electronic and Other Electrical Equipment and Components, except Computer Equipment median of -3.1%.

Low debt

Debt is 36.9% of shareholders' equity, under the 40% we consider low.

Debt rising against equity

Debt to equity rose from 6.1% five years ago to 36.9%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 91.0% of total debt.

Interest well covered

Operating income covers interest expense 26.3 times.

Short-term assets cover short-term debts

Current assets are 1.64 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 6.25; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Smith A O paid dividends worth 1.7% of the share price over the last twelve months.

Yield below Treasuries

The 1.7% yield is below the 4.7% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Smith A O yields 1.7%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 40.3% of net income.

Covered by free cash flow

Dividends take 35.5% of free cash flow.