APPLIED INDUSTRIAL TECHNOLOGIES, INC. (AIT): what the price requires
At today's price, APPLIED INDUSTRIAL TECHNOLOGIES, INC. (AIT) is priced for today's economics sustained for ~6.2 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/AIT
Headline
| Field | Value |
|---|---|
| Ticker | AIT |
| Company | APPLIED INDUSTRIAL TECHNOLOGIES, INC. |
| Current price | $328.03/sh |
| Composition | Service Center Based Distribution 66% / Engineered Solutions 34% |
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 | 8.5% |
| Operating margin today | 10.9% |
| Margin compression implied | -2.4pp |
| Must persist for | 6.2y |
| Multiple paid | 24x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, 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 ~1.7 years.
Reconcile: at the x-ray's 9.3% required return this reads ~21.8%/yr; the models below use their own rates.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.06σ |
| cohort percentile (of 225 peers) | 55 |
| sustained it ~6.2 years at this level | 25% |
| 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 | 2.83x | 5 | expensive |
| Earnings | 2.79x | 4 | expensive |
| Relative | 1.93x | 5 | expensive |
| Growth | 1.21x | 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 9.1%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $257.92 | 1.27x | yes | FCF base $0.5B, growth 8% (input: historical growth), terminal g 4.0%, WACC 9.1%, 6yr projection |
| DCF Exit Multiple | Growth | $326.83 | 1.00x | yes | Exit EV/EBITDA: 20.8x / 22.8x / 24.8x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $234.43 | 1.40x | yes | P/E 21.79x (blended: static sector reference 18x + trailing (TTM) 31x), scenarios: 18.2x / 21.8x / 25.3x (bear / base = reference held flat / bull), EV/EBITDA 15.23x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $115.83 | 2.83x | yes | BV/sh $49.36, ROE (TTM) 21.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $176.31 | 1.86x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $270.23 | 1.21x | yes | Rev $4.8B, growth 8% (input: historical growth; tapered), Terminal P/S: 2.1x / 2.6x / 3.0x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $127.08 | 2.58x | yes | EPS $10.59, growth 6% (input: historical EPS growth), PEG=4.78 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $93.86 | 3.49x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.46B × (1−26%) / WACC 9.1% → EPV (no growth) |
| Residual Income | Asset | $166.27 | 1.97x | yes | BV $49.36 + 5yr PV of (ROE (TTM) 21.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $108.45 | 3.02x | yes | √(22.5 × EPS $10.59 × BVPS $49.36) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $170.38 | 1.93x | yes | EBITDA $0.55B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $120.78 | 2.72x | yes | FCF $438.9M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $189.20 | 1.73x | yes | EPS $10.59 × (8.5 + 2×6.4%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $26.92 | 12.19x | yes | BV $49.36 × (ROIC 5.0% / WACC 9.1%) |
| P/Sales Sector | Relative | $321.01 | 1.02x | yes | Revenue $4.84B × sector P/S 2.5x |
| PEG Fair Value | Relative | $101.80 | 3.22x | yes | EPS $10.59 × (PEG 1.5 × growth 6.4% (input: historical EPS growth)) → PE 9.6x |
| Earnings Yield | Earnings | $114.49 | 2.87x | yes | EPS $10.59 / 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 debt | $153.6m |
| Net debt / NOPAT (after-tax) | 0.40x |
| Net debt / operating income (pre-tax) | 0.30x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
At $337.81 the stock trades well above where the static methods land, near 24 times operating income against a blended central read closer to $207. Only the forward-growth method reaches the price, which makes this a durability premium.
The mix is shifting toward higher-value work. Engineered Solutions grew over 9 percent organically with orders up more than 10 percent, led by Automation up about 20 percent and fluid power around 13 percent.
The balance sheet is conservative, with net debt under half of one year of operating income, and management raised the dividend 11 percent while continuing a steady acquisition program in automation and fluid power.
Bull Case
Begin with how far the price sits above the methods, because that distance is the whole question. At $337.81 (June 27, 2026) the stock trades near 24 times operating income, while the asset, earnings-power and peer-multiple frames all land far below, around a blended $207. Only the forward-growth method reaches the price. That pattern is not a red flag by itself; it is what a durable compounder looks like when the static frames, which price the business as if it stopped improving, cannot see the value of a long runway. The bet the price makes is that Applied Industrial keeps compounding operating profit for years, and the recent results say that bet has a basis.
The reason the runway is credible is the mix shift toward higher-value work. Applied runs two segments, Service Center Based Distribution, which was 66 percent of sales in fiscal 2025, and Engineered Solutions (FY2025 10-K, accession 0000109563-25-000080). The Engineered Solutions segment, which spans "fluid power components and systems, flow control solutions, automation technologies" and related products (same filing), grew over 9 percent organically, with orders up more than 10 percent, Automation up about 20 percent and fluid power around 13 percent. This is the part of the business that carries higher margins and stickier customer relationships, because Applied does not just ship parts, it provides "product fabrication and repair, and inventory management solutions" and measures "productivity improvement and cost savings potential" for customers (same filing). The deeper into a customer's plant-floor operations the company embeds, the harder it is to displace.
The financial profile lets the compounding run without strain. Net debt is under half of a single year of operating income, the company guided fiscal 2026 to earnings per share of $10.60 to $10.75 with an EBITDA margin around 12.3 to 12.4 percent, and third-quarter organic sales grew 6 percent, the strongest in over two years. Management raised the dividend 11 percent and deployed over $300 million across buybacks, acquisitions and dividends, continuing a disciplined program of roughly 18 acquisitions since 2018 adding about $1 billion in acquired sales. A lightly levered distributor steadily shifting toward automation and fluid power, buying well-chosen tuck-ins, and deepening its service relationships is exactly the kind of business whose durable forward economics the static valuation frames structurally underprice.
Bear Case
The competitive structure is the threat the premium ignores. Industrial distribution is a fragmented, intensely competitive business, and Applied competes "within North America" against national, regional and local distributors (FY2025 10-K, accession 0000109563-25-000080), many selling similar bearings, power transmission and fluid-power products. The long-term disruption thesis is that the value-added distributor model erodes from two directions: large online and direct channels that take the simple, catalog-style reorder business on price, and manufacturers that increasingly sell automation and components directly to large customers. Applied's defense is its plant-floor service depth, but a meaningful share of the Service Center segment is still moving commodity industrial parts, the part most exposed to a digital, price-driven channel. At a multiple that prices durable compounding, any erosion of that base matters.
The organic growth underneath the premium is more modest than the headline suggests. Full-year guidance calls for total sales growth of 7.2 to 7.7 percent but organic growth of only 3.8 to 4.2 percent, which means a large share of the growth is acquired rather than generated internally. The price embeds operating growth held near the self-funding ceiling for about seven years, a pace only about 23 percent of comparable companies sustained that long, and a low-single-digit organic distributor has to keep buying growth to clear that bar. Acquisition-led growth carries integration risk and rising prices for the next deal, and the company itself has flagged cost pressures it "may be unable to pass along to customers" (same filing).
The end market is also cyclical and tied to industrial production. Applied's demand tracks manufacturing activity, capital spending and the health of customers across energy, metals and general industry, so a slowdown in industrial output compresses both volume and the higher-margin automation orders the bull case leans on. The company has already noted LIFO-related cost headwinds and softer guidance episodes. A richly priced, partly acquisition-driven distributor exposed to digital disruption on its commodity base and to the industrial cycle on its whole base has limited room to disappoint before the price re-rates toward where the asset and earnings methods sit.
Valuation
The price decomposes as a durability premium. Asset, earnings-power and peer-multiple models all read the stock as richly valued, and only the forward-growth DCF reaches the $337.81 price, against a blended central value near $207. The asset and earnings frames sit well below the price because they value the business as if its growth and mix improvement stopped, which understates a distributor that is actively shifting toward higher-margin engineered solutions.
The gap to the price is the growth-and-duration bet. Inverting the current price, the market is paying about 24 times operating income, which implies operating growth held near the self-funding ceiling for roughly seven years. The near-term pace is within what Applied has recently delivered, with third-quarter organic growth of 6 percent and Engineered Solutions up over 9 percent organically, so the rate is achievable; the stretch is the duration, since only about 23 percent of comparable companies sustained it that long. The complication is that full-year organic growth is guided at only 3.8 to 4.2 percent, so total growth depends on continued acquisitions, and the price therefore embeds both a long runway and successful, ongoing M&A. The balance sheet supports the strategy, with net debt under half a year of operating income, and the 11 percent dividend increase signals confidence. The investment case rests on the mix shift toward automation and fluid power lifting margins and stickiness enough to justify a premium multiple, while the acquisition machine keeps adding accretive sales. If both hold, the durable compounding earns the premium; if organic demand softens or deals get pricier, a low-single-digit organic distributor priced for ceiling growth has a long way down to the static methods.
Catalysts
Engineered Solutions momentum is the central catalyst. The segment grew over 9 percent organically with orders up more than 10 percent, led by Automation up about 20 percent, fluid power around 13 percent, and flow control around 8 percent. Because this is the higher-margin, stickier part of the business, the order and organic-growth trend in Engineered Solutions is the key signal that the mix shift the price pays for is continuing.
The acquisition program is the second catalyst. Management plans more deals in automation, fluid power and flow control, and has deployed over $300 million year to date across buybacks, M&A and dividends, with an 11 percent dividend increase. Announced acquisitions, their size and pricing, and the organic-versus-acquired split in reported growth are the items to track, since the full-year guide of 3.8 to 4.2 percent organic growth means M&A is doing much of the work.
The industrial cycle and cost trends are the swing factors. Applied's demand tracks manufacturing activity and capital spending, so industrial-production data and customer end-market health are external catalysts in either direction. Management has flagged LIFO and cost pressures, so margin durability against rising input costs is worth watching each quarter. Full-year guidance updates, currently EPS of $10.60 to $10.75 with EBITDA margin around 12.3 to 12.4 percent, remain the main proof point on whether the compounding is holding.
Peer Cohorts (Per Segment, With Filing Citations)
Service Center Based Distribution (reported)
- MSM (MSC INDUSTRIAL DIRECT CO., INC.)
- FY2025 10-K: …more efficient. Certain of our customer fulfillment centers also utilize robotic packing solutions and order-picking systems that improve productivity and associate safety while reducing energy consumption and saving space. Some specialty or custom items and very large orders are shipped directly from the…
- FY2025 10-K: …management solutions; our catalogs; our brochures; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses. We carry many of the products we sell in our inventory, so that orders for these in-stock products are processed and fulfilled the day the order is received. We…
- DXPE (DXP Enterprises, Inc.)
- FY2025 10-K: …purchasing large quantities of product are able to outsource all or most of those needs to us. For customers with smaller supply needs, we are able to combine our traditional distribution capabilities with our broad product categories and advanced ordering systems to allow the customer to engage in one-stop sourcing…
- FY2025 10-K: …an initial 20-40%. • SmartServ, DXP's integrated service pump solution. It provides a more efficient way to manage the entire life cycle of pumping systems and rotating equipment. Our SmartSolutions programs listed above help customers to cut product costs, improve supply chain efficiencies and obtain expert…
- GWW (W.W. GRAINGER, INC.)
- FY2025 10-K: …through its KeepStock® program which provides onsite industry expertise, flexible storage solutions and intuitive customer tools powered by proprietary processes and technology. 6 In the Endless Assortment segment, orders are placed primarily through online channels. Zoro leverages the High-Touch Solution N.A.'s DC…
- FY2025 10-K: …In the Endless Assortment segment, Grainger offers an expansive product assortment that contains millions of products, including those outside of traditional industrial MRO categories. Zoro offers approximately 13 million products and MonotaRO provides access to approximately 29 million products, primarily through…
- FAST (FASTENAL CO)
- FY2025 10-K: …locations, and from different geographic areas. It is also derived from supplier information and from customer demographic information. Our computer system monitors the inventory level for all stock items and triggers replenishment, or prompts a buyer to purchase, as necessary, based on an established minimum-maximum…
- FY2025 10-K: …room to grow our current installed base of devices before it begins to approach the number of units we believe the market can support. We estimate the market could support as many as 1.7 million vending units and, as a result, we anticipate continued growth in installed devices over time. Our industrial vending…
- WCC (WESCO International, Inc.)
- FY2025 10-K: …us to service our customers around the world. Wesco has more than 700 sites, including distribution centers, fulfillment centers and sales offices, with operations in approximately 50 countries. Our global distribution network includes facilities that operate as large distribution centers or fulfillment centers in…
- FY2025 10-K: …chain management and project management/execution across the project lifecycle. Geography We sell to global customers through our network of distribution centers, fulfillment centers and sales offices consisting of 427 locations in the U.S., 144 in Canada, 49 in the Asia Pacific region, which includes Australia, 48…
- DNOW (DNOW INC.)
- FY2025 10-K: …The customer service representatives develop order packages based on specific customer needs, interface with manufacturers to determine product availability, ensure on-time delivery and establish pricing of materials and services based on guidelines and predetermined metrics established by management. Operations Our…
- FY2025 10-K: …supply chain. An efficient supply chain can help reduce the carbon footprint of deliveries to our RDCs, super centers and branches and ultimately to our customers. Use of our RDCs and super centers allows us to aggregate products across multiple suppliers and customers, which, in turn, prevents each customer from…
Engineered Solutions (reported)
- DXPE (DXP Enterprises, Inc.)
- FY2025 10-K: …to lower total purchasing costs, improve inventory management, ensure consistently high levels of customer service and enhance purchasing power. This focus on fewer suppliers has led to consolidation within the fragmented industrial distribution industry. • Customized Integrated Service. As industrial customers focus…
- FY2025 10-K: …through a continuum of customized and efficient MRO solutions. We also provide services such as field safety supervision, in-house and field repair, and predictive maintenance. A majority of our SC segment sales are derived from customer purchase orders for products. Sales are directly solicited from customers by our…
- DNOW (DNOW INC.)
- FY2025 10-K: …through approximately 300 strategic locations including regional distribution centers, super centers, branches and corporate offices. Our customers use our supply chain solutions, PVF, pumps, fabricated equipment and other infrastructure products that we supply in mission critical process applications that require us…
- FY2025 10-K: …point of issue technology, project management, business process and performance metrics reporting. These solutions allow us to leverage the infrastructure of our Enterprise Resource Planning ("ERP") systems and other technologies to streamline our customers' purchasing process, from requisition to procurement to…
- MSM (MSC INDUSTRIAL DIRECT CO., INC.)
- FY2025 10-K: …through inventory optimization and reduced tooling and labor costs. All of our digital solutions function directly as front-end ordering systems for our e-Portal-based customers. These solutions take advantage of advanced technologies built upon the latest innovations in E-commerce and wireless and cloud-based…
- FY2025 10-K: …of which solution is utilized. Our vending solutions include different kinds of machines, such as storage lockers or carousels, which can stand alone or be combined with other machines. Our vending machines use network or web-based software to enable customers to gain inventory visibility, save time and drive…
- WCC (WESCO International, Inc.)
- FY2025 10-K: …communications projects. Specific applications include projects for data centers, hospitals, public transit, waste water treatment facilities, EV charging stations, and renewable and solar power plants. OEM customers require products used in the manufacturing of automotive, industrial, medical, transportation,…
- FY2025 10-K: …and cable. Customized Solutions. Our customers have unique business models, challenges and priorities. Our dedicated technical experts have extensive experience and product and services knowledge that enable them to provide solutions tailored to the various needs of our customers. With specialized industry knowledge…
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.