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Plumbing For Profits in The Steamy World of Water Heaters (AOS)

Posted on November 24, 2021

Milwaukee’s A.O. Smith Corporation (NYSE:AOS) has been heating water through sub-zero Wisconsin winters since 1874.

Today, the company manufactures both gas and electric units and sells them to individuals and institutions across the planet.

At the end of October, AOS beat earnings estimates and buyers went warp-wild on the stock, creating the great money-making opportunity before us today.

Not to worry, sugar.

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Anyway, there’s a lot to be said, so let’s start with the fundamentals –

  • Price/Earnings is a hefty 28.56 (a bit bloaty for a metal-molder, in our opinion).
  • Dividend Yield is 1.36%,
  • Price to Book is a sky-high 6.92, and… wait for it –
  • Insiders have sold 43.06% of their stock over the last six months, for a dollar amount of just over $50 million.
  • More to the point, $36 million of that total was dumped in just the last three weeks!

As mentioned above, better-than-expected Q3 results sent the stock into geyser mode (the not-so-surprising result of diminished expectations).

Additionally, the company admitted that a great proportion of its third-quarter revenue was generated by inflation.  The company merely passed on its inputs to consumers.

Water heater prices are up some 50% this year.

Now take a look at the chart –

Many happy returns!

Matt McAbby

 

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