For most investors, how much a stock’s price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you’d invested in A.O. Smith (AOS) ten years ago? It may not have been easy to hold on to AOS for all that time, but if you did, how much would your investment be worth today?
A.O. Smith’s Business In-Depth
With that in mind, let’s take a look at A.O. Smith’s main business drivers.
Headquartered in Milwaukee, WI, A. O. Smith Corporation is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. The company specializes in offering innovative, and energy-efficient solutions and products, which are developed and sold on a global platform.
A. O. Smith reports operations under two geographic segments — North America and Rest of World. The segments are briefly discussed below:
North America (75.1% of total segmental sales generated in 2022): This segment engages in manufacturing and marketing of water heaters, boilers, water treatment products, commercial solar water heating systems, expansion tanks, swimming pool and spa heaters, and others. These products are sold primarily to the company’s commercial and residential customers in North America.
Main product brands under this segment are Lochinvar, Aquasana, Bradford White, Rheem, Rinnai, Navien and Aerco.
Rest of World (24.9% of total segmental sales generated in 2022): This segment comprises operations in India, China, the Middle East and Europe markets. It primarily manufactures and markets vast products, comprising fully modulating, non-condensing gas tankless water heater. Apart from this, the segment manufactures air purifier and water treatment products, especially in Asia.
In China, the company develops water purifier, combi boiler, gas tankless, residential & commercial heat pump, air purifier, and other products.
Anyone can invest, but building a successful investment portfolio takes a combination of a few things: research, patience, and a little bit of risk. So, if you had invested in A.O. Smith a decade ago, you’re probably feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in June 2013 would be worth $3,807.17, or a 280.72% gain, as of June 21, 2023. Investors should keep in mind that this return excludes dividends but includes price appreciation.
Compare this to the S&P 500’s rally of 176.33% and gold’s return of 37.64% over the same time frame.
Looking ahead, analysts are expecting more upside for AOS.
Improving supply chains and robust demand for commercial and residential boilers and water treatment products in North America bode well for A. O. Smith. Higher sales from India are supporting the Rest of the World unit’s performance amid weakness in China. The company’s efforts to add shareholder value hold promise. In the first quarter, AOS paid dividends of $45.4 million, up 2.7% year over year, and repurchased shares worth $53.1 million. Its sound liquidity position adds to the positivity. However, weakness in the Rest of the World segment due to lower consumer demand in China is concerning. Also, adverse foreign currency movements are affecting sales in China. Amid demand softness, AOS has provided a conservative outlook for 2023. Lower volumes in the residential water heater industry are hurting the company’s operations.
The stock has jumped 5.04% over the past four weeks. Additionally, no earnings estimate has gone lower in the past two months, compared to 7 higher, for fiscal 2023; the consensus estimate has moved up as well.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.