AAON (AAON) shares have seen a sharp pullback recently, with the stock finishing at $95.90 after dropping 2.5% on the day. Investors seem to be weighing up the company’s latest streak of returns and outlook.
AAON’s recent pullback comes after a string of strong longer-term gains. The share price has returned over 15% in the past 90 days alone, even though its 1-year total shareholder return sits at -14.4%. Momentum appears to be cooling a bit after stellar multi-year performance, but the growth story remains in focus as investors reassess valuation and future prospects.
This raises the question: with shares pulling back but still well above last year’s lows, is AAON undervalued at current levels, or is the market already factoring in the company’s projected growth and future prospects?
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Most Popular Narrative: 7.1% Undervalued
AAON’s widely watched fair value estimate sits at $103.25, notably above the last close of $95.90. This suggests modest upside remains. The valuation factors in ambitious operating leverage and technological tailwinds, creating room for debate among investors.
Ongoing investments in new manufacturing capacity and automation (for example, the Memphis facility) are expected to nearly double BasX capacity by year-end. This would remove current operational constraints and shift from near-term cost drag to profit contribution by 2026 as orders ramp up, supporting long-term operating leverage.
Curious what earnings leap and margin expansion assumptions drive this premium? The narrative rests on bullish forecasts and industry-shaking financial projections. See which numbers could reset the market’s expectations and make or break AAON’s future.
However, lingering operational disruptions or a slowdown in data center demand could quickly undermine AAON's expected growth and margin recovery narrative.
Another View: Industry Multiples Suggest Overvaluation
Yet, a look at AAON’s price-to-earnings ratio tells a different story. At 64x, it far exceeds the US Building industry average of 21.2x, its peer average of 26.9x, and even the estimated fair ratio of 45.8x. This wide gap suggests investors might be paying a substantial premium today. Could this premium be justified, or are expectations running too far ahead?
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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.
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