Smith A O Corp

AOS

Household Appliances

Mkt Cap

$12.18B

PE

21.10

Debt

$119.7M

Cash

$251.6M

EV

$12.05B

FCF

$573.1M

Market Cap

$12.18B

P/E Ratio

21.10

Debt

$119.7M

Cash

$251.6M

EV

$12.05B

FCF

$573.1M

Charts data: {"Earnings":[{"time":"2014-12-30","value":207800000},{"time":"2015-12-30","value":282900000},{"time":"2016-12-30","value":326500000},{"time":"2017-12-30","value":296500000},{"time":"2018-12-30","value":444200000},{"time":"2019-12-30","value":370000000},{"time":"2020-12-30","value":344900000},{"time":"2021-12-30","value":487100000},{"time":"2022-12-30","value":235700000},{"time":"2023-12-30","value":556600000}],"Sales":[{"time":"2014-12-30","value":2356000000},{"time":"2015-12-30","value":2536500000},{"time":"2016-12-30","value":2685900000},{"time":"2017-12-30","value":2996700000},{"time":"2018-12-30","value":3187900000},{"time":"2019-12-30","value":2992700000},{"time":"2020-12-30","value":2895300000},{"time":"2021-12-30","value":3538900000},{"time":"2022-12-30","value":3753900000},{"time":"2023-12-30","value":3852800000}],"Net Margins":[{"time":"2014-12-30","value":0.08820033955857386},{"time":"2015-12-30","value":0.11153163808397398},{"time":"2016-12-30","value":0.12156074314010201},{"time":"2017-12-30","value":0.09894216972002536},{"time":"2018-12-30","value":0.13933937701935442},{"time":"2019-12-30","value":0.12363417649614061},{"time":"2020-12-30","value":0.11912409767554312},{"time":"2021-12-30","value":0.13764164005764504},{"time":"2022-12-30","value":0.062788033778204},{"time":"2023-12-30","value":0.14446636212624583}],"Assets":[{"time":"2014-12-30","value":2515300000},{"time":"2015-12-30","value":2646500000},{"time":"2016-12-30","value":2891000000},{"time":"2017-12-30","value":3197300000},{"time":"2018-12-30","value":3071500000},{"time":"2019-12-30","value":3058000000},{"time":"2020-12-30","value":3160700000},{"time":"2021-12-30","value":3474400000},{"time":"2022-12-30","value":3332300000},{"time":"2023-12-30","value":3213900000}],"Stockholders Equity":[{"time":"2014-12-30","value":1381300000},{"time":"2015-12-30","value":1442300000},{"time":"2016-12-30","value":1515300000},{"time":"2017-12-30","value":1648800000},{"time":"2018-12-30","value":1717000000},{"time":"2019-12-30","value":1666800000},{"time":"2020-12-30","value":1848300000},{"time":"2021-12-30","value":1832200000},{"time":"2022-12-30","value":1747700000},{"time":"2023-12-30","value":1844400000}],"ROE":[{"time":"2014-12-30","value":0.1504379931948165},{"time":"2015-12-30","value":0.19614504610691258},{"time":"2016-12-30","value":0.21546888404936315},{"time":"2017-12-30","value":0.17982775351770985},{"time":"2018-12-30","value":0.2587070471753058},{"time":"2019-12-30","value":0.22198224142068634},{"time":"2020-12-30","value":0.18660390629226858},{"time":"2021-12-30","value":0.2658552559764218},{"time":"2022-12-30","value":0.13486296275104423},{"time":"2023-12-30","value":0.3017783561049664}],"ROA":[{"time":"2014-12-30","value":0.137279847334314},{"time":"2015-12-30","value":0.171131683355375},{"time":"2016-12-30","value":0.1781390522310619},{"time":"2017-12-30","value":0.18074625465236294},{"time":"2018-12-30","value":0.1997069835585219},{"time":"2019-12-30","value":0.17302158273381296},{"time":"2020-12-30","value":0.15920523934571457},{"time":"2021-12-30","value":0.19629288510246373},{"time":"2022-12-30","value":0.1086336764396963},{"time":"2023-12-30","value":0.25190578424966553}]}

A. O. Smith Corporation manufactures and markets residential and commercial gas, heat pump and electric water heaters, boilers, tanks, and water treatment products in North America, China, Europe, and India. It operates through two segments, North America and Rest of World. The company offers water heaters for residences, restaurants, hotels, office buildings, laundries, car washes, and small businesses; commercial boilers for hospitals, schools, hotels, and other large commercial buildings, as well as residential boilers for homes, apartments, and condominiums; and water treatment products comprising point-of-entry water softeners, well water solutions, and whole-home water filtration products, on-the-go filtration bottles, point-of-use carbon, and reverse osmosis products for residences, restaurants, hotels, and offices. It also provides commercial water treatment and filtration product; expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, and related products and parts; and electric wall-hung, gas tankless, combi-boiler, and heat pump and solar water heaters. The company offers its products primarily under the A. O. Smith, State, Lochinvar, and water softener brands. It distributes its products through independent wholesale plumbing distributors, as well as through retail channels consisting of hardware and home center chains, and manufacturer representative firms; and offers Aquasana branded products directly to consumers through e-commerce. A. O. Smith Corporation was founded in 1874 and is headquartered in Milwaukee, Wisconsin.

Sector

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3/31/18
10-K
12/31/17

DCF

Discounted Cash Flow Valuation of Smith A O Corp

Calculate

Growth Years

Growth

Start

End

Discount

Start

End

Multiple

g\r	+10%	+11%	+12%	+13%	+14%
0%	10	9	8	8	7
+1%	11	10	9	8	8
+2%	13	11	10	9	8
+3%	14	13	11	10	9
+4%	17	14	12	11	10

Years	0	1	2	3	4	5	6	7	8	9	10	TV
FCF	$573.1M	$628.5M	$685.9M	$745M	$805.4M	$866.6M	$927.8M	$988.6M	$1.048B	$1.106B	$1.161B	$11.61B
DCF		$546.5M	$518.6M	$489.9M	$460.5M	$430.8M	$401.1M	$371.7M	$342.7M	$314.4M	$287.1M	$2.871B
Value	$7.034B

Chart P/E ratio

In the chart Earnings are multiplied by this value.

Earnings Growth 4.3%

Earnings Stability 20%

Competitiveness and MOAT

High margins render the company resilient under dire circumstances, hence able to drive competitors out or acquire them. ROE and ROA measure the average flow generated by each invested dollar. Their marginal value is a forecast of future growth, and it is considered by Buffett and Munger the most important single indicator.

The Net Margin is high enough to offer a good protection on the profits in case of higher costs or higher interests. Furthermore higher margins reduce earnings’ volatility.

Over time the ROA has been increasing indicating a higher marginal ROA with respect to the calculated one, giving a good sign for continued growth.

Years	12-2015	12-2016	12-2017	12-2018	12-2019	12-2020	12-2021	12-2022	12-2023	TTM
Net Margin	11%	12%	9.9%	14%	12%	12%	14%	6.3%	14%	15%
ROA	17%	18%	18%	20%	17%	16%	20%	11%	25%	26%
ROE	20%	22%	18%	26%	22%	19%	27%	13%	30%	31%

What is the average Net Margin?

The average Net Margin over the past 5 years is +12.12%.

What is the trend of Net Margin?

The trend of Net Margin over the past 5 years is -0.4%.

What is the average Return on Assets (ROA)?

The average ROA over the past 5 years is +18.15%.

What is the trend of Return on Assets (ROA)?

The trend of ROA over the past 5 years is +0.3%.

What is the average Return on Equity (ROE)?

The average ROE over the past 5 years is +22.83%.

What is the trend of Return on Equity (ROE)?

The trend of ROE over the past 5 years is +0.1%.

Safety & Stabiliy

Being debt the number one cause of investment losses and company death, the ratio Debt/FCF is of utmost importance to guarantee safety. On the other hand the Graham’s stability measures the drawdown of earnings, hence indicating the reliability of the flow generated by the company.

Under the assumption that FCF does not diminish and debt does not increase, the current years to repay the debt are acceptable.

The Graham’s stability indicate a relevant drawdown, consider checking when it has occured and why.

Years	12-2015	12-2016	12-2017	12-2018	12-2019	12-2020	12-2021	12-2022	12-2023	TTM
Debt FCF	0.96	0.90	1.80	0.61	0.74	0.24	0.36	1.10	0.23	0.21
Debt Equity	0.18	0.22	0.25	0.13	0.17	0.06	0.11	0.20	0.07	0.06
MIN
Graham Stability	-	-	100%	100%	100%	93%	100%	59%	100%	59%

What is the Debt/FCF?

The Debt/FCF trailing twelve month is 0.21.

What is the trend of Debt/FCF?

The trend of Debt/FCF over the past 5 years is -0.02.

What is the Graham’s Stability?

Graham’s Stability measure stands at 0.59.

Growth

Growth can be dangerous when forecasting, simply projecting the current growth is in general wrong. A company passes through multiple phases, from being young and unprofitable, to the first periods of profitability and high growth, until it arrives at a period of regime with limited growth. Identifying in which phase the company is in may help forecasting.

Earnings growth has been increasing in past years.

Years	12-2016	12-2018	12-2020	12-2022	Trend
Revenue	5.3%	3.9%	10%	2.6%	-0.13%
Net Income	7.9%	4.6%	17%	140%	4.1%
Stockholders Equity	2.8%	1.4%	-0.07%	5.5%	-0.62%
FCF	7.2%	10%	5.8%	86%	-0.45%

What is the 5 year Revenue CAGR?

The Revenue CAGR over the past 5 years is +3.86%.

What is the trend of Revenue growth?

The trend of Revenue growth rate over the past 5 years is -0.13%.

What is the 5 year Earnings CAGR?

The Earnings CAGR over the past 5 years is +4.61%.

What is the trend of Earnings growth?

The trend of Earnings growth rate over the past 5 years is +4.05%.

What is the 5 year Equity CAGR?

The Equity CAGR over the past 5 years is +1.44%.

What is the trend of Equity growth?

The trend of Equity growth rate over the past 5 years is -0.62%.

What is the 5 year FCF CAGR?

The FCF CAGR over the past 5 years is +10.45%.

What is the trend of FCF growth?

The trend of FCF growth rate over the past 5 years is -0.45%.