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AAON

AAON NasdaqGS:AAON Stock Report

Last Price

US$61.64

Market Cap

US$3.3b

7D

2.4%

1Y

-8.3%

Updated

06 Aug, 2022

Data

Company Financials +
AAON fundamental analysis
Snowflake Score
Valuation0/6
Future Growth4/6
Past Performance1/6
Financial Health5/6
Dividends0/6

AAON Stock Overview

AAON, Inc., together with its subsidiaries, engages in engineering, manufacturing, marketing, and selling air conditioning and heating equipment in the United States and Canada.

AAON Competitors

Price History & Performance

Summary of all time highs, changes and price drops for AAON
Historical stock prices
Current Share PriceUS$61.64
52 Week HighUS$83.79
52 Week LowUS$47.50
Beta0.69
1 Month Change10.51%
3 Month Change18.29%
1 Year Change-8.34%
3 Year Change40.16%
5 Year Change86.22%
Change since IPO68,559.01%

Recent News & Updates

Jul 15
Does AAON (NASDAQ:AAON) Have A Healthy Balance Sheet?

Does AAON (NASDAQ:AAON) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously...

Jun 29

AAON: Looking Back, Looking Forward - Still Too Dear

AAON's "story" appeared to be a good one, embraced by investors even before the increase in business due to COVID-19. Unfortunately for investors, the reality is not matching the rhetoric, and results achieved immediately following restructuring, and addition of new modern plant, are not being maintained. Increases in SG&A costs, likely the "Selling" element, are eroding any gross profit growth. The newly acquired BasX might help to shore up declining profits in the existing business, but not enough to provide the overall profit growth levels to justify the current share price. AAON: Investment Thesis Back on Dec. 22, 2021 I published article, "AAON: 'Mr. Market' Is Showing Irrational Exuberance." Since that time the AAON, Inc. (AAON) share price has fallen by 31.77%, compared to a fall of 15.88% in the S&P 500 over the same period. But "Mr. Market" continues to show irrational exuberance, with AAON's earnings multiple still at the lofty level of 45.10 at market close on Jun. 24, 2022. One would think AAON must be experiencing or about to experience explosive earnings growth, if the market is willing to price shares at 45 times earnings per share. In this article, I provide analysis to explore whether AAON has been experiencing high EPS growth, and if not, if it might be about to experience high earnings growth, that would justify its high multiple. The quick answers to those two questions are - No!!! and No!!, and I maintain my Strong Sell rating for this stock. I will take a backward view first. Past performance is very often the best guide to future performance. AAON: Looking For Evidence Of Past Explosive Earnings Growth Continuing Into The Future Table 1 below compares revenue, cost and earnings growth going back as far as FY 2017. Table 1 Data source: SEC filings Commencing FY 2021, AAON began reporting segments described as "AAON Oklahoma," "AAON Coil Products," and "BasX." There is no reconciliation provided to former segments. New segment analysis is provided only on a fiscal year basis and only back to FY 2019, when a restructuring of operations had been completed. Segment reporting is down to the Gross Profit level only, with no allocation of operating costs below that level. Comments on Table 1 analysis by segment and total Oklahoma segment revenue - Aided by increased demand related to COVID-19, Oklahoma segment grew revenues in 2020 by 9.6% over 2019. In 2021, this segment grew revenues by just 1.1% over 2020, and just $4.8 million revenue growth over 2019. Coil Products segment revenue - Coil Products segment grew revenues in 2020 by 9.7% over 2019. In 2021, this segment grew revenues by 19.8% over 2020. Total segments revenue excl BasX - Aided by increased demand related to COVID-19, total segments grew revenues in 2020 by 9.6% over 2019. In 2021, Oklahoma segments grew revenues by just 1.1% over 2020, and just $4.8 million revenue growth over 2019. In 2021, total segments (excluding BasX) grew revenues by just 3.1% over 2020, due to the high proportion of low growth Oklahoma in the revenue mix. Total segments revenue incl. BasX - In 2021, total segments including BasX grew revenues by 3.9% over 2020, due to the high proportion of low growth Oklahoma segment in the revenue mix. Total segments comparison 2021 versus 2019 - The far right column in Table 1 is provided to eliminate the distortion to trends caused by COVID-19 impact. The percentages shown are for average yearly growth in revenue, costs, profit and EPS over the two years 2019 to 2021. Revenue - On the revenue front, the high proportion of low growth roof top units sales, results in average yearly revenue growth of 6.3%, despite some smaller categories showing good growth. The inclusion of BasX, without a prior period revenue figure lifts total revenue growth to 6.7%. Cost of sales and Gross profit - Overall, cost of sales grew at a slightly lower 6.5% per year, resulting in gross profit increasing by a higher 7.4% per year. The higher revenue growth Coil Products segment has a lower gross profit margin, limiting its contribution to earnings growth. Selling, general and administration expenses impact on Income from operations - Selling, general & admin. expenses grew by a much higher rate (14.8% per year) than Gross profit (7.4% per year), resulting in income from operations showing only an average 1.7% per year growth from 2019 to 2021. Effective Income tax rate impact on Net income - A low 15.1% effective tax rate in 2021 allowed net income to grow by 4.6% per year. Shareholder dilution impact on earnings per share - Shareholder dilution due to shares issued to staff exceeding share repurchases caused EPS growth to decrease to 3.5%, compared to net income growth of 4.6% average per year. I see no evidence in those figures of past or emerging growth that would justify a P/E ratio of 45.10. AAON: Looking For Evidence Of Explosive Earnings Growth In The Future Table 2 below compares revenue, cost and earnings growth for AAON for first quarter 2022, 2021, and 2020. Table 2 Data source: SEC filings Making A Fair Comparison There are some difficulties in making a fair comparison between quarters above. Q1 2022 has the newly acquired BasX segment included, with no proforma amounts provided by AAON for Q1 2021 to allow a valid comparison and judge potential growth rates for BasX. Performance in Q1 2021 was affected adversely by a number of factors which are described in some detail in the Q1 2021 earnings call transcript available through Seeking Alpha Premium. Q1 2020 appears to be a suitable quarter for comparison Q1 2022 against. Per the following excerpts from Q1 2020 SA Premium earnings call transcript, Net sales were up 20.8% to $137.5 million from $113.8 million... due primarily to our increased sheet metal production from the additional Salvagnini machines that were placed into operation... gross profit increased 68.9% to $42.9 million from $25.4 million... gross profit was 31.2% in the quarter just ended compared to 22.3% in 2019. We continue to see overall raw material cost decrease. The company has improved its labor and overhead efficiencies through increased production and absorption of fixed costs. Selling, general, and administrative expenses increased 11.2% to $15.2 million from $13.7 million in 2019....Income from operations increased 142.3% to $27.8 million or 20.2% of sales from $11.5 million or 10.1% of sales in 2019. Our effective tax rate decreased to 21.5% from 23.5% In case it might be thought it is "cherry picking" to choose Q1 2020 for comparing current performance to, I would say performance like that reflected in Q1 2020 results would be required to justify AAON's current high multiple. Even with new acquisition BasX included, Q1 2022 results compare unfavorably to Q1 2020 I have done a similar thing with Table 2 as for Table 1 by adding the right hand column showing average yearly growth rates for revenue and costs and expenses.

Shareholder Returns

AAONUS BuildingUS Market
7D2.4%1.5%1.0%
1Y-8.3%-18.3%-12.9%

Return vs Industry: AAON exceeded the US Building industry which returned -18.3% over the past year.

Return vs Market: AAON exceeded the US Market which returned -12.8% over the past year.

Price Volatility

Is AAON's price volatile compared to industry and market?
AAON volatility
AAON Average Weekly Movement5.1%
Building Industry Average Movement6.4%
Market Average Movement7.9%
10% most volatile stocks in US Market17.1%
10% least volatile stocks in US Market3.2%

Stable Share Price: AAON is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: AAON's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19872,881Gary Fieldshttps://www.aaon.com

AAON, Inc., together with its subsidiaries, engages in engineering, manufacturing, marketing, and selling air conditioning and heating equipment in the United States and Canada. The company operates through three segments: AAON Oklahoma, AAON Coil Products, and BasX. It offers rooftop units, data center cooling solutions, cleanroom systems, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls.

AAON Fundamentals Summary

How do AAON's earnings and revenue compare to its market cap?
AAON fundamental statistics
Market CapUS$3.27b
Earnings (TTM)US$60.44m
Revenue (TTM)US$601.50m

54.1x

P/E Ratio

5.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
AAON income statement (TTM)
RevenueUS$601.50m
Cost of RevenueUS$450.76m
Gross ProfitUS$150.74m
Other ExpensesUS$90.30m
EarningsUS$60.44m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Aug 08, 2022

Earnings per share (EPS)1.14
Gross Margin25.06%
Net Profit Margin10.05%
Debt/Equity Ratio13.5%

How did AAON perform over the long term?

See historical performance and comparison

Dividends

0.6%

Current Dividend Yield

33%

Payout Ratio
We’ve recently updated our valuation analysis.

Valuation

Is AAON undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

0/6

Valuation Score 0/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for AAON?

Other financial metrics that can be useful for relative valuation.

AAON key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue5.6x
Enterprise Value/EBITDA32x
PEG Ratio1.5x

Price to Earnings Ratio vs Peers

How does AAON's PE Ratio compare to its peers?

AAON PE Ratio vs Peers
The above table shows the PE ratio for AAON vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average17.6x
REZI Resideo Technologies
10.6x11.4%US$3.3b
AWI Armstrong World Industries
21.6x14.1%US$4.1b
AZEK AZEK
27.5x14.7%US$3.3b
HAYW Hayward Holdings
10.7x3.4%US$2.5b
AAON AAON
54.1x35.2%US$3.3b

Price-To-Earnings vs Peers: AAON is expensive based on its Price-To-Earnings Ratio (54.1x) compared to the peer average (17.6x).


Price to Earnings Ratio vs Industry

How does AAON's PE Ratio compare vs other companies in the US Building Industry?

Price-To-Earnings vs Industry: AAON is expensive based on its Price-To-Earnings Ratio (54.1x) compared to the US Building industry average (17.6x)


Price to Earnings Ratio vs Fair Ratio

What is AAON's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

AAON PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio54.1x
Fair PE Ratio30.9x

Price-To-Earnings vs Fair Ratio: AAON is expensive based on its Price-To-Earnings Ratio (54.1x) compared to the estimated Fair Price-To-Earnings Ratio (30.9x).


Share Price vs Fair Value

What is the Fair Price of AAON when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: AAON ($61.64) is trading above our estimate of fair value ($34.15)

Significantly Below Fair Value: AAON is trading above our estimate of fair value.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.


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Future Growth

How is AAON forecast to perform in the next 1 to 3 years based on estimates from 3 analysts?

Future Growth Score

4/6

Future Growth Score 4/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


35.2%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: AAON's forecast earnings growth (35.2% per year) is above the savings rate (1.9%).

Earnings vs Market: AAON's earnings (35.2% per year) are forecast to grow faster than the US market (12.8% per year).

High Growth Earnings: AAON's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: AAON's revenue (19% per year) is forecast to grow faster than the US market (7.9% per year).

High Growth Revenue: AAON's revenue (19% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if AAON's Return on Equity is forecast to be high in 3 years time


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Past Performance

How has AAON performed over the past 5 years?

Past Performance Score

1/6

Past Performance Score 1/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


9.4%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: AAON has a high level of non-cash earnings.

Growing Profit Margin: AAON's current net profit margins (10%) are lower than last year (14.9%).


Past Earnings Growth Analysis

Earnings Trend: AAON's earnings have grown by 9.4% per year over the past 5 years.

Accelerating Growth: AAON's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: AAON had negative earnings growth (-17.8%) over the past year, making it difficult to compare to the Building industry average (19.9%).


Return on Equity

High ROE: AAON's Return on Equity (12.6%) is considered low.


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Financial Health

How is AAON's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: AAON's short term assets ($283.7M) exceed its short term liabilities ($114.2M).

Long Term Liabilities: AAON's short term assets ($283.7M) exceed its long term liabilities ($123.1M).


Debt to Equity History and Analysis

Debt Level: AAON's net debt to equity ratio (12.4%) is considered satisfactory.

Reducing Debt: Insufficient data to determine if AAON's debt to equity ratio has reduced over the past 5 years.

Debt Coverage: AAON's debt is well covered by operating cash flow (39.3%).

Interest Coverage: AAON's interest payments on its debt are well covered by EBIT (230x coverage).


Balance Sheet


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Dividend

What is AAON current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


0.62%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: AAON's dividend (0.62%) isn’t notable compared to the bottom 25% of dividend payers in the US market (1.52%).

High Dividend: AAON's dividend (0.62%) is low compared to the top 25% of dividend payers in the US market (4.09%).


Stability and Growth of Payments

Stable Dividend: AAON is not paying a notable dividend for the US market, therefore no need to check if payments are stable.

Growing Dividend: AAON is not paying a notable dividend for the US market, therefore no need to check if payments are increasing.


Earnings Payout to Shareholders

Earnings Coverage: AAON is not paying a notable dividend for the US market.


Cash Payout to Shareholders

Cash Flow Coverage: AAON is paying a dividend but the company has no free cash flows.


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Management

How experienced are the management team and are they aligned to shareholders interests?

0.9yrs

Average management tenure


CEO

Gary Fields (62 yo)

5.75yrs

Tenure

US$2,912,108

Compensation

Mr. Gary D. Fields has been Chief Executive Officer at AAON, Inc. since May 12, 2020. Mr. Fields has been the President of AAON, Inc. since November 1, 2016. Mr. Fields is an Owner and President of GKR Par...


CEO Compensation Analysis

Compensation vs Market: Gary's total compensation ($USD2.91M) is below average for companies of similar size in the US market ($USD6.58M).

Compensation vs Earnings: Gary's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.


Leadership Team

Experienced Management: AAON's management team is not considered experienced ( 0.9 years average tenure), which suggests a new team.


Board Members

Experienced Board: AAON's board of directors are considered experienced (5.8 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: AAON insiders have only sold shares in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

AAON, Inc.'s employee growth, exchange listings and data sources


Key Information

  • Name: AAON, Inc.
  • Ticker: AAON
  • Exchange: NasdaqGS
  • Founded: 1987
  • Industry: Building Products
  • Sector: Capital Goods
  • Implied Market Cap: US$3.271b
  • Shares outstanding: 53.07m
  • Website: https://www.aaon.com

Number of Employees


Location

  • AAON, Inc.
  • 2425 South Yukon Avenue
  • Tulsa
  • Oklahoma
  • 74107
  • United States

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/08/06 00:00
End of Day Share Price2022/08/05 00:00
Earnings2022/03/31
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.