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Should You Think About Buying A. O. Smith Corporation (NYSE:AOS) Now?

Today we're going to take a look at the well-established A. O. Smith Corporation (NYSE:AOS). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The company is now trading at yearly-high levels following the recent surge in its share price. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on A. O. Smith’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for A. O. Smith

What Is A. O. Smith Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 0.82% above our intrinsic value, which means if you buy A. O. Smith today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $85.98, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since A. O. Smith’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will A. O. Smith generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 21% over the next couple of years, the future seems bright for A. O. Smith. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? AOS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

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Are you a potential investor? If you’ve been keeping an eye on AOS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for A. O. Smith from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in A. O. Smith, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.