AAON, INC. (AAON): what the price requires

Generated: 2026-07-13 · Source: https://boothcheck.com/report/AAON

Headline

Field	Value
Ticker	AAON
Company	AAON, INC.
Current price	$112.09/sh
Composition	AAON Oklahoma 56% / AAON Coil Products 23% / BASX 22%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin needed	10.2%
Operating margin today	10.5%
Margin compression implied	-0.3pp
Must persist for	13.5y
Multiple paid	58x operating income

The operating-margin requirement is derived from the framework's value band at year 8, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 10.4% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.3 years.

Reconcile: at the x-ray's 9.3% required return this reads ~10.9 years; the models below use their own rates.

How unusual the bet is: high

Reference	Value
vs own history	+0.28σ
cohort percentile (of 225 peers)	93
sustained it ~10 years at this level	14%
implied end-window share	0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	6.20x	4	expensive
Earnings	7.23x	2	expensive
Relative	2.31x	3	expensive
Growth	1.01x	3	expensive

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=12)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$21.67	5.17x	yes	FCF base $0.0B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.2%, 7yr projection
DCF Exit Multiple	Growth	$111.52	1.01x	yes	Exit EV/EBITDA: 34.5x / 37.5x / 40.5x (bear / base = today's held flat / bull), 7yr
Relative Valuation	Relative	$60.17	1.86x	yes	P/E 36.28x (blended: sector 18x + trailing (TTM) 79x), scenarios: 29.0x / 36.3x / 43.5x (bear / base = sector held flat / bull), EV/EBITDA 19.64x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$15.35	7.30x	yes	BV/sh $11.23, ROE (TTM) 12.6%, ke 9.3%
Two-Stage Excess Return	Asset	$17.81	6.29x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$152.50	0.74x	yes	Rev $1.6B, growth 28% (input: historical growth; tapered), Terminal P/S: 4.6x / 5.8x / 6.9x (bear / base = today's held flat / bull, cap 12x)
Growth-Adjusted P/E	Relative	—	—	no	—
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$15.66	7.16x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.16B × (1−24%) / WACC 9.2% → EPV (no growth)
Residual Income	Asset	$18.33	6.12x	yes	BV $11.23 + 5yr PV of (ROE (TTM) 12.6% − Kₑ 9.3%) × BV; BV grows 8.2%/yr
Graham Number	Asset	$18.94	5.92x	yes	√(22.5 × EPS $1.42 × BVPS $11.23) — Graham's conservative floor
EV/EBITDA Relative	Relative	$35.75	3.14x	yes	EBITDA $0.25B × sector EV/EBITDA 12.0x
FCF Yield	Earnings	$5.47	20.49x	yes	FCF $43.7M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF Yield	Earnings	$2.65	42.30x	yes	SBC-adj FCF $0.02B (FCF $0.04B − SBC $0.02B) capitalized at Kₑ (excluded from median)
Ben Graham Formula	Earnings	$1.19	94.19x	yes	EPS $1.42 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/B	Asset	$5.57	20.12x	yes	BV $11.23 × (ROIC 4.6% / WACC 9.2%) (excluded from median)
P/Sales Sector	Relative	$48.60	2.31x	yes	Revenue $1.62B × sector P/S 2.5x
PEG Fair Value	Relative	—	—	no	—
Earnings Yield	Earnings	$15.35	7.30x	yes	EPS $1.42 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net cash	$13k
Net debt / NOPAT (after-tax)	0.00x
Net debt / operating income (pre-tax)	0.00x
Share count CAGR (dilution)	0.7%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• AAON funds its growth without debt. Gross debt is essentially zero and the company sits in a small net cash position, so the entire data-center-cooling expansion is being financed from internally generated cash rather than the balance sheet. That is rare for a manufacturer ramping capacity this fast.
• The price is demanding, though. At $137 the market is paying roughly 70 times operating income, a level only the most aggressive forward-growth method can justify; the asset, earnings-power, and most peer-multiple methods land far below. The premium is a bet on durable compounding the static frames cannot price.
• The reason the market is paying it: a data-center-cooling boom. Q1 2026 sales rose 54% to $496.9 million, the BASX data-center segment grew 72%, and total backlog hit a record $2.13 billion, prompting management to raise full-year revenue growth guidance to 40% to 45% from a prior 18% to 20%.

Bull Case

Start with how AAON deploys capital, because it is the cleanest part of the story. The company carries essentially no debt, sits in a small net cash position, and is funding a steep capacity expansion entirely from its own cash flow. For a manufacturer scaling production to chase a demand surge, self-funding is the conservative choice, and it means shareholders are not being asked to absorb leverage risk on top of execution risk. The share count has been roughly flat, growing under 1% a year, so management is not papering over the build-out with dilution either. When a company can ramp this aggressively without reaching for debt or equity, it tells you the underlying cash generation is real.

What that capital is buying is a genuine position in data-center cooling. The FY2025 10-K describes the BASX segment as the home of data-center cooling solutions, cleanroom products, and air handling (FY2025 10-K, accession 0000824142-26-000005), and that segment is where the growth has concentrated. First-quarter 2026 BASX sales grew 72.4% to $228.6 million, and liquid cooling, the technology high-density AI clusters increasingly require, grew 186.8% on a trailing-twelve-month basis. The backlog is the leading indicator that matters: BASX backlog surged 160% year over year to $1.62 billion, total company backlog reached a record $2.13 billion, and the book-to-bill ratio has exceeded 2 times for four consecutive quarters. Orders are arriving more than twice as fast as the company can ship them.

That order strength is why management reset expectations sharply higher, raising full-year 2026 guidance to 40% to 45% revenue growth from a prior 18% to 20% and pointing to roughly $1 billion of BASX revenue this year. The legacy rooftop-HVAC business, split across the Oklahoma and Coil Products operations, provides a stable base of recurring replacement demand underneath the data-center surge. A debt-free balance sheet, a backlog growing faster than shipments, a structural tailwind from AI-driven data-center construction, and a management team funding it all from cash flow: that is the combination the bull case is built on, and it is why the market is willing to look well past current earnings.

Bear Case

The bear case begins with the difference between peak demand and sustainable demand. AAON's order surge is real, but it is concentrated in data-center cooling at the very moment AI-driven data-center construction is running at an unprecedented pace. That is the definition of a cyclical peak: a wave of capacity additions across the entire industry, pulled forward by a building boom that will not continue at this rate indefinitely. The book-to-bill above 2 times for four straight quarters is wonderful while it lasts, and it is also exactly the kind of order pattern that snaps back hard when hyperscaler construction normalizes. A backlog built during a buildout is worth less than a backlog built on steady replacement demand, because the former evaporates when the buildout pauses.

The margin signal already shows the strain. First-quarter 2026 gross margin fell to 25.1% from 26.8% a year earlier, as the company absorbed unabsorbed fixed costs from new facilities, temporary outsourcing, and price-cost timing. Management calls these pressures intentional and temporary, and they may be, but they are also what happens when a manufacturer races to add capacity into a demand spike. If the spike fades before the new plants reach full utilization, those same fixed costs become a drag rather than a temporary headwind, and the operating leverage that looks so attractive on the way up works in reverse. The underlying returns are not as strong as the growth implies: return on invested capital sits around 4.6% against a cost of capital near 9.2%, which means the business is not currently earning its cost of capital even during the boom.

The price makes all of this unforgiving. At roughly 70 times operating income, no valuation family except the most aggressive forward-growth method reaches $137 (June 27, 2026). The earnings-power method lands near $16, the asset methods in the high teens, and the blended peer multiple near $67, less than half the price. Inverting the quote requires operating growth held near its ceiling for about 15 years, and on the historical record only about 14% of comparable fast-growers sustained a pace like that for even ten. The bear case is not that AAON is a poor company. It is that the stock is priced as if a cyclical, construction-driven demand peak is a permanent state, and the holder is paying 70 times current operating income to find out whether it is.

Valuation

Inverting the price frames the bet precisely. At $137 the market is paying about 70 times company-wide operating income, which works backward to operating growth held near the top of its sustainable range for about 15 years, solved at a 10.5% cost of capital where each percentage point of growth moves the implied horizon by roughly 2.4 years. Treat the 15-year figure as approximate. The notable feature is where the stretch lies: the near-term growth rate is within what AAON has recently delivered, so the demanding part is not the rate but the duration. On the historical base rate, only about 14% of comparable fast-growers sustained a pace like that for even ten years, which is why the read comes out elevated, above what fundamentals comfortably support.

The valuation X-ray shows an unusually wide spread, and the width is the message. Only the forward-growth family reaches the price: the exit-multiple DCF lands near $140 and the discounted-future-market-cap method, built on 28% revenue growth, lands near $193. Every other family sits far below. The earnings-power method lands near $16, the asset methods in the high teens, the relative methods between roughly $36 and $67. When asset, earnings, and most peer-multiple methods cluster at a fraction of the quote and only growth extrapolation reaches it, the market is paying for durable compounding the static frames structurally cannot price.

The reconciliation runs through the backlog and the balance sheet. The record $2.13 billion backlog and the raised 40% to 45% growth guidance are the concrete evidence behind the forward-growth methods, and the debt-free balance sheet means the company can fund delivery without strain. So the price is defensible only on the view that the data-center cooling demand is durable rather than a construction-cycle peak. If you believe the AI buildout sustains BASX growth for years, the forward methods are the right lens and the price is a high but coherent bet. If you mark the business to its normalized earnings power, the price is many times what the static frames support. The valuation conclusion is therefore entirely a judgment on the durability of one demand wave.

Catalysts

The first-quarter 2026 report, released at the start of May, reset the story. Net sales rose 54.3% to $496.9 million and GAAP diluted EPS rose 37.1% to $0.48. The data-center-cooling BASX segment grew 72.4% to $228.6 million, liquid cooling sales rose 186.8% on a trailing-twelve-month basis, and total company backlog reached a record $2.13 billion, up 107%, with the book-to-bill ratio above 2 times for a fourth consecutive quarter. On the strength of that order book management raised full-year 2026 guidance to 40% to 45% revenue growth from a prior 18% to 20%, and pointed to roughly $1 billion of BASX revenue for the year. The stock rose on the release.

The forward catalysts are about conversion and margin. The items to watch are how quickly the record backlog converts to shipped revenue as new capacity comes online, whether gross margin recovers from the first-quarter 25.1% as utilization of the recently commissioned facilities improves (management framed the dip from unabsorbed fixed costs and temporary outsourcing as intentional and temporary), and whether data-center order intake stays strong or begins to normalize as the AI construction wave matures. The legacy rooftop-HVAC demand provides a steadier base underneath. The next quarterly print, due in the early-August window, is the first test of whether the raised guidance is tracking and whether margins are recovering as promised. Continued backlog growth with improving margins would validate the reset; a margin miss or order softening would put the elevated valuation under pressure.

Sources: AAON Q1 2026 results (investors.aaon.com, prnewswire.com); StockTitan record-backlog coverage (stocktitan.net); Investing.com Q1 2026 slides (investing.com).

Peer Cohorts (Per Segment, With Filing Citations)

AAON Oklahoma / AAON Coil Products (reported)

• CARR (CARRIER GLOBAL CORPORATION)
• (no filing in the citation store)
• JCI (JOHNSON CONTROLS INTERNATIONAL PLC)
• (no filing in the citation store)
• LII (LENNOX INTERNATIONAL INC)
• (no filing in the citation store)
• TT (TRANE TECHNOLOGIES PLC)
• (no filing in the citation store)
• AOS (A. O. Smith Corporation)
• (no filing in the citation store)

BASX (reported)

• CARR (CARRIER GLOBAL CORPORATION)
• (no filing in the citation store)
• JCI (JOHNSON CONTROLS INTERNATIONAL PLC)
• (no filing in the citation store)
• TT (TRANE TECHNOLOGIES PLC)
• (no filing in the citation store)
• LII (LENNOX INTERNATIONAL INC)
• (no filing in the citation store)
• VRT (Vertiv Holdings Co)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.