Aaon, Inc. (NASDAQ: AAON)

Sector: Industrials Industry: Building Products & Equipment CIK: 0000824142
Market Cap 8.21 Bn
P/B 37.70
P/E 160.59
P/S 21.40
ROIC (Qtr) 8.89
Div Yield % 0.26
Rev 1y % (Qtr) 17.41
Total Debt (Qtr) 360.14 Mn
Debt/Equity (Qtr) 0.42
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About

AAON, Inc., a Nevada-based corporation, is a prominent player in the heating, ventilation, and air conditioning (HVAC) systems industry. It operates through three business segments: AAON Oklahoma, AAON Coil Products, and BASX. AAON Oklahoma is responsible for engineering, manufacturing, and selling semi-custom and custom HVAC systems, designing and manufacturing controls solutions, and selling retail parts. AAON Coil Products focuses on engineering and manufacturing a selection of HVAC systems and coils, while BASX specializes in custom, high-performance...

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Investment thesis

Bull case

  • Strong tangible asset base of 1.37B provides 3.80x coverage of total debt 360.14M, indicating robust asset backing and low credit risk.
  • Tangible assets of 1.37B provide exceptional 68.60x coverage of deferred revenue 19.97M, showing strong service capability backing.
  • Operating cash flow of (17.94M) provides strong 1494.92x coverage of operating expenses (12000), showing operational efficiency.
  • Free cash flow of (227.58M) provides excellent 7.35x coverage of dividends (30.95M), indicating sustainable shareholder returns.
  • Retained earnings of 806.43M provide full 2.24x coverage of long-term debt 360.14M, indicating strong internal capital position.

Bear case

  • Operating cash flow of (17.94M) barely covers its investment activities of (237.95M), with a coverage ratio of 0.08, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 2.27M against inventory of 250.51M, the 0.01 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of (17.94M) provides thin coverage of dividend payments of (30.95M) with a 0.58 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Operating cash flow of (17.94M) provides insufficient coverage of deferred revenue obligations of 19.97M, which is -0.90x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of (17.94M) shows concerning coverage of stock compensation expenses of 17.34M, with a -1.03 ratio indicating potential earnings quality issues.

Segments Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Building Products & Equipment
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 TT Trane Technologies plc 104.89 Bn 35.94 4.92 4.62 Bn
2 JCI Johnson Controls International plc 91.64 Bn 26.98 3.82 9.71 Bn
3 CARR CARRIER GLOBAL Corp 56.66 Bn 38.18 2.61 12.25 Bn
4 LII Lennox International Inc 19.91 Bn 24.71 3.83 1.77 Bn
5 CSL Carlisle Companies Inc 17.50 Bn 23.63 3.49 2.88 Bn
6 MAS Masco Corp /De/ 15.94 Bn 19.68 2.11 3.17 Bn
7 OC Owens Corning 13.83 Bn 13.90 1.63 5.61 Bn
8 WMS Advanced Drainage Systems, Inc. 13.26 Bn 28.18 4.44 1.45 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 5.33 2.00
EV to Cash from Ops. EV/CFO 120.06 13.48
EV to Debt EV to Debt 22.70 10.94
EV to EBIT EV/EBIT 109.00 24.16
EV to EBITDA EV/EBITDA 92.20 -11.14
EV to Free Cash Flow [EV/FCF] EV/FCF 201.87 46.78
EV to Market Cap EV to Market Cap 1.00 1.12
EV to Revenue EV/Rev 21.31 2.81
Price to Book Value [P/B] P/B 37.70 4.24
Price to Earnings [P/E] P/E 160.59 47.40
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.24 0.80
Dividend Payout Ratio % Div Payout % (Qtr) 30.90 11.22
Dividend per Basic Share Div per Share (Qtr) 0.38 0.71
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) -13.62 10.90
Interest Coverage Int. cover (Qtr) 10.01 111.58
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -73.62 -24.93
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -65.99 61.26
Dividend Growth (1y) % Div 1y % (Qtr) 18.75 1.67
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -42.28 -186.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -31.05 -57.93
EBIT Growth (1y) % EBIT 1y % (Qtr) -45.96 -102.26
EBT Growth (1y) % EBT 1y % (Qtr) -50.84 -299.15
EPS Growth (1y) % EPS 1y % (Qtr) -47.66 -598.34
FCF Growth (1y) % FCF 1y % (Qtr) -285.49 89.70
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -18.01 -3.62
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.86 0.88
Cash Payout Ratio Cash Payout (Qtr) 0.16 0.13
Cash Ratio Cash Ratio (Qtr) 0.01 1.57
Current Ratio Curr Ratio (Qtr) 3.04 3.42
Debt to Equity Ratio Debt/Equity (Qtr) 0.42 0.79
Interest Cover Ratio Int Coverage (Qtr) 10.01 111.58
Times Interest Earned Times Interest Earned (Qtr) 10.01 111.58
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 15.80 3.54
EBIT Margin % EBIT Margin % (Qtr) 10.02 1.23
EBT Margin % EBT Margin % (Qtr) 9.02 -1.76
Gross Margin % Gross Margin % (Qtr) 26.90 28.65
Net Profit Margin % Net Margin % (Qtr) 7.60 -3.80