AZZ Inc. (AZZ): what the price assumes
In the published model solve dated 2026-Q2, anchored at $138.34, AZZ Inc. (AZZ) is priced for +15.4% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.
Generated: 2026-08-30 · Source: https://boothcheck.com/report/AZZ
Headline
| Field | Value |
|---|---|
| Ticker | AZZ |
| Company | AZZ Inc. |
| Sector / Industry | Industrials |
| Current price | $138.34/sh |
| Composition | Construction 56% / Industrial 9% / Consumer 8% / Transportation 10% / Electrical 9% / Other 8% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 4.4% |
| Operating margin today | 16.2% |
| Margin compression (value-band) | -11.8pp |
| Implied growth | 15.4% |
| Multiple paid | 19x operating income |
The operating-margin figure is value-band context at year 11: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 9.4% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | +0.08σ |
| cohort percentile (of 225 peers) | 42 |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
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 | 1.68x | 5 | expensive |
| Earnings | 2.56x | 5 | expensive |
| Relative | 1.12x | 2 | expensive |
| Growth | 1.20x | 3 | expensive |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.4%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $115.50 | 1.20x | yes | FCF base $0.2B, growth 6% (input: historical growth), terminal g 4.0%, WACC 8.4%, 5yr projection |
| DCF Exit Multiple | Growth | $127.17 | 1.09x | yes | Exit EV/EBITDA: 10.9x / 12.9x / 14.9x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | — | — | no | P/E 18x (static sector reference · 2026-04), scenarios: 15.1x / 18.0x / 20.9x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $71.36 | 1.94x | yes | BV/sh $45.79, ROE (TTM) 14.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $88.10 | 1.57x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $101.16 | 1.37x | yes | Rev $1.7B, growth 6% (input: historical growth; tapered), Terminal P/S: 2.1x / 2.5x / 2.9x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $102.89 | 1.34x | yes | EPS $6.56, growth 16% (input: historical EPS growth), PEG=1.34 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $53.97 | 2.56x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.24B × (1−21%) / WACC 8.4% → EPV (no growth) |
| Residual Income | Asset | $90.76 | 1.52x | yes | BV $45.79 + 5yr PV of (ROE (TTM) 14.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $82.21 | 1.68x | yes | √(22.5 × EPS $6.56 × BVPS $45.79) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | EBITDA $0.36B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $43.34 | 3.19x | yes | FCF $169.2M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $38.48 | 3.60x | yes | SBC-adj FCF $0.16B (FCF $0.17B − SBC $0.01B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $211.67 | 0.65x | yes | EPS $6.56 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $17.39 | 7.96x | yes | BV $45.79 × (ROIC 3.2% / WACC 8.4%) |
| P/Sales Sector | Relative | — | — | no | Revenue $1.68B × sector P/S 2.5x |
| PEG Fair Value | Relative | $154.33 | 0.90x | yes | EPS $6.56 × (PEG 1.5 × growth 15.7% (input: historical EPS growth)) → PE 23.5x |
| Earnings Yield | Earnings | $70.92 | 1.95x | yes | EPS $6.56 / 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 | — |
Economic-Unit Decomposition (Sum Of The Parts)
One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.
| Unit | Role | Valuation basis | Revenue | Reported profit | Value evidence | Status |
|---|---|---|---|---|---|---|
| Metal Coatings | operating | enterprise | $758.7m | $203.6m operating-income | withheld | unresolved no unit value |
| Precoat Metals | operating | enterprise | $891.4m | $138.1m operating-income | withheld | unresolved no unit value |
No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.
Solvency
| Field | Value |
|---|---|
| Net debt | $494.8m |
| Net debt / NOPAT (after-tax) | 2.31x |
| Net debt / operating income (pre-tax) | 1.82x |
| Interest coverage | 5.6x |
| Share count CAGR (dilution) | 4.1% |
| Burning cash | no |
Bullet Takeaways
- Two coating businesses sit under one ticker: hot-dip galvanizing that protects fabricated steel from rust, and coil coating that paints metal before it is formed, with construction end markets supplying 56% of revenue and the 10-K describing three distinct operating segments: the AZZ Metal Coatings segment, the AZZ Precoat Metals segment, and the AZZ Infrastructure Solutions segment.
- The demanding part of today's price is duration rather than pace: it embeds operating profit compounding about 17.5% a year for five straight years, and only around 41% of comparable fast growers held a pace like that for five years.
- Management lifted full-year fiscal 2027 sales guidance to a range of $1.8 billion to $1.85 billion at the July 8, 2026 print, which makes the next quarterly report the first real test of that raise.
Bull Case
Take the objection first, because it is the obvious one. A company that coats structural steel for construction customers looks like a pure cyclical, the kind of business whose earnings evaporate the moment builders stop building. Construction end markets are 56% of revenue. If that read were right, paying a premium multiple here would be paying peak-cycle prices for peak-cycle earnings.
The read is not right, and the reason is what galvanizing actually is. Steel exposed to weather rusts, and rust is not a preference. Dipping fabricated steel in molten zinc adds decades of life for a small share of a project's total cost, which means the decision is rarely revisited when budgets tighten. It is also stubbornly local: nobody ships a truckload of beams across the country to be dipped, so the business is a network of plants close to fabricators, and density in a region is the competitive advantage. That is a very different asset from a factory competing on global price.
Where the two segments diverge is instructive. First-quarter fiscal 2027 sales reached $448.5 million, up 6.3%, but the split underneath was uneven: Metal Coatings grew 12.3% to $210.3 million while Precoat Metals rose 1.5% to $238.2 million, a first-quarter record for that segment helped by price increases and the production ramp at the Washington, Missouri plant. Growth is coming from the higher-margin galvanizing side while the coil coating side holds volume and recovers input costs.
Zinc and natural gas are the two input costs that matter, and the company manages them mechanically rather than hopefully. The 10-K describes the practice: we evaluate market conditions and follow a general practice of locking in the fixed premiums associated with zinc on annual contracts unless market conditions dictate otherwise, and we enter into energy contracts for natural gas, normally for durations of six to twelve months. That is not a hedge against a permanent repricing of zinc, but it does convert sudden commodity moves into scheduled ones, which is most of what an operator needs.
The balance sheet has been getting cheaper, which is the quiet part of the story. AZZ financed the Precoat acquisition with a leveraged structure, and the 10-K notes a senior secured initial term loan in the aggregate principal amount of $ 1.3 billion (the "Term Loan B"), due May 13, 2029, since repriced in August 2025. The weighted average rate on outstanding borrowings was 5.94% and 7.54% as of February 28, 2026 and 2025, respectively. Operating profit now covers the interest bill about 5.1 times over, against net debt near 1.74 times operating profit. Every basis point saved on that stack drops to the bottom line without a single additional ton of steel being processed.
Against the industrial cohort the margin profile holds up. AZZ runs a 16.6% trailing operating margin. SSD earns 19.7% on 2.38 billion of revenue growing 6.3%, MWA 19.2%, and LECO 17.0% on 4.35 billion growing 7.9%, while VMI sits at 10.6%, GTES at 13.1%, and KMT at 9.4%. This is a business earning near the top of a good group rather than a marginal operator hoping for the cycle.
Management's own record with the numbers it publishes is the last piece. Since 2006 guidance has been raised on 15 separate occasions against a single cut, with 19 reaffirmations in between. A team that rarely has to walk a forecast back is a team that sets forecasts it can meet.
Bear Case
Cyclicals are dangerous precisely when they look healthy, and the shape of AZZ's recent earnings deserves that scrutiny. Construction supplies 56% of revenue, and construction volume is not something the company controls. The 10-K is direct about what a downturn does: A number of factors, including financing conditions and potential bankruptcies in the industries we serve, could adversely affect our customers and their ability or willingness to fund their internal projects in the future and pay for services. Steel gets galvanized when someone has already decided to build something.
The trailing operating margin of 16.6% is close to the best this business has produced, and today's price extrapolates from there. What it embeds is operating profit compounding roughly 17.5% a year for five consecutive years. The company's own recent record can reach that rate; its longer-run average pace runs closer to 13%. The problem is not the first year. It is the fifth. Among companies that have grown at that pace, only about 41% were still doing it five years later, and the ones that stopped rarely announced it in advance.
Look at the two segments and the strain is already visible. Precoat Metals is the larger revenue line, and in fiscal 2026 its sales fell, with the 10-K attributing the decline to volumes: Sales for the AZZ Precoat Metals segment decreased $ 21.3 million. In the most recent quarter it grew 1.5%, and the release credits price increases taken to offset input cost inflation rather than volume. Price-led growth in a coil coating business is recovery of cost, not expansion of demand. The compounding the price requires has to come from somewhere, and half the revenue base is currently not supplying it.
The input side is hedged only in the near term. Zinc premiums are locked annually and natural gas contracts run six to twelve months. That schedule smooths a commodity move; it does not absorb one. If zinc resets to a higher level and stays there, the fixed-premium contracts roll into the new reality within a year, and a margin structure built at 16.6% is the thing that gives.
The earnings themselves have also flattered the recent picture. Net income in the first quarter of fiscal 2027 was $52.0 million, down 69.6% from the prior-year quarter, because that earlier period carried a gain from the joint venture's divestiture rather than from operations. An investor reading trailing bottom-line figures without that context has been reading a sale.
Capital structure closes the case. This is not a company retiring stock: the share count has grown about 4.1% a year over the four years to May 2026, so each holder's claim on those earnings has been shrinking, not compounding. The debt carries a maintenance test, with the 10-K citing a Ratio (as defined in the loan agreement) no greater than 4.5, and while the company reported compliance as of February 28, 2026, a covenant only binds in the scenario where earnings fall. Roughly 97 million dollars of equity interests sit outside the operating businesses, and against a 4.5 billion dollar market value that anchors very little. Methods that value the current cash stream with no growth attached land far under today's price, which is another way of saying that almost everything being paid for here has not happened yet.
Valuation
Duration is the demanding part of this price, not pace. At $150.28 the market pays roughly 19 times company-wide operating income, and inverting that produces an embedded requirement of about 17.5% annual operating profit growth over five years. AZZ has grown at that rate recently. What is unusual is the length of the run being assumed: only about 41% of comparable fast growers were still compounding at that pace five years on. That requirement is sensitive to the discount rate behind it. Computed at a 9.6% cost of capital against 4% terminal growth, every additional percentage point of cost of capital moves the implied pace by roughly 6.8 points, so the direction matters more than the decimal.
The methods split along a clean line. Peer multiples support the price, which sits about 18% above where that family of method centers, and the forward cash-flow approaches are not far behind. The asset-based and earnings-power methods land well below. The mechanism behind the earnings-power gap is worth naming rather than treating as a verdict: those approaches capitalize the trailing free cash stream at a 9.3% required return and assume the business never grows again, which for a company mid-way through a plant ramp and a debt paydown is a deliberately severe assumption. The peer-multiple read gets there differently, applying the sector EV/EBITDA benchmark to roughly 0.36 billion of EBITDA.
So the disagreement is about whether AZZ is an industrial coatings compounder or a coating company at a good point in its cycle. Nothing in the trailing numbers settles it, which is the honest answer.
Cohort position argues the former, at least on profitability. A 16.6% trailing operating margin puts AZZ above VMI at 10.6%, TKR at 12.1%, and GTES at 13.1%, and within reach of SSD at 19.7% and MWA at 19.2%. Sector peer multiples are also not being paid at the top of the range here, which is unusual for a business earning in the upper half of its group.
Solvency shapes the downside more than it shapes the upside. Operating profit covers interest about 5.1 times over, and net debt sits near 1.74 times operating profit, comfortably inside the maintenance test the credit agreement imposes. The cost of that debt has come down, with the 10-K reporting the weighted average rate on outstanding borrowings at 5.94% and 7.54% as of February 28, 2026 and 2025, respectively. The offset is on the equity side: the share count has risen about 4.1% a year over the four years through May 2026, so per-share progress has had to come entirely from the business rather than from arithmetic.
Two of the four families of method say the price already reflects a good outcome, and the other two say it reflects a great one. The five-year requirement is where those views get settled.
Catalysts
First-quarter fiscal 2027 results, released July 8, 2026 for the quarter ended May 31, 2026, gave the market a mixed picture with a clear underlying trend. Sales rose 6.3% to $448.5 million, and the growth was concentrated in galvanizing: Metal Coatings climbed 12.3% to $210.3 million while Precoat Metals added 1.5% to $238.2 million, a first-quarter record for that segment.
The headline bottom line looked far worse than the business did. Net income of $52.0 million was down 69.6% year over year, because the comparable quarter a year earlier included a gain tied to the joint venture's sale of its electrical enclosures operations rather than to trading performance. On the company's own adjusted basis, net income rose 3.6%. That gap between the reported and the underlying number is the single most likely source of confusion in the current numbers.
Management responded by raising full-year fiscal 2027 guidance, taking the sales range to $1.8 billion to $1.85 billion and the adjusted EBITDA range, a company-defined measure, to $375 million to $415 million. That raise fits a long pattern: since 2006 guidance has been raised on 15 separate occasions against one cut. The Washington, Missouri coil coating facility continues its production ramp, and the next quarterly report is the first checkpoint on whether the raised range holds.
Peer Cohorts (Per Segment, With Filing Citations)
Metal Coatings / Precoat Metals (reported)
- VMI (VALMONT INDUSTRIES INC)
- FY2025 10-K: …rapid increases in data consumption across mobile and connected devices. Our customers include wireless carriers, cell site operators, electric utilities, and state and federal agencies that require products for two-way radio communication, radar, broadcasting, and security applications. The continued expansion of 5G…
- FY2025 10-K: …classified as "Product sales" when the performance obligation involves manufacturing and selling goods, and as "Service sales" when the performance obligation involves providing a service. Service revenue is primarily associated with the Coatings product line and the remote monitoring subscription services within the…
- SSD (Simpson Manufacturing Co., Inc.)
- FY2025 10-K: …specification and use of our building material products with engineers, truss component manufacturers, builders, lumber dealers, and homeowners as well as to support our customers with additional solutions and services. In an effort to help mitigate exposure to the cyclicality of the U.S. housing market as well as to…
- FY2025 10-K: …trade disputes. The steel market continues to be dynamic, with a high degree of uncertainty about future pricing trends. Numerous factors may cause steel prices to increase in the future. In addition to increases in steel prices, steel mills may impose surcharges for zinc, energy and freight in response to their…
- MWA (MUELLER WATER PRODUCTS, INC.)
- FY2025 10-K: …often extend over several years, and customers typically place orders incrementally throughout the contract term. While we believe we share a mutual understanding with the customer regarding the total contract value at the time of award, orders are reflected in our backlog once a formal order is received, not when…
- FY2025 10-K: …different manufacturers. For our specialty valve products such as butterfly, plug, and check valves, our principal competitors are DeZURIK, Val-Matic and McWane, Inc. The competitive environment for many of Water Management Solutions' products, including fire hydrants and gas repair products, is mature, and many end…
- TKR (TIMKEN CO)
- FY2025 10-K: …manufacturers, ship owners, pump makers and other global industrial customers that require advanced sealing systems. Timken offers other industrial sealing solutions that come in a variety of types and material options and are used in manufacturing, food processing, mining, power generation, chemical processing,…
- FY2025 10-K: , renewable energy, automation, automotive original equipment ("OE"), agriculture/turf, rail, aerospace, auto/truck aftermarket, construction, services, metals and mining, heavy truck OE, and marine. No single customer accounts for more than 5% of total net sales. Products: Timken manufactures and manages global…
- HLIO (HELIOS TECHNOLOGIES, INC.)
- FY2025 10-K: …Joyonway, i3PD and Cygnus Reach brands. Financial information about our business segments is presented in Note 16 of the Notes to the Consolidated Financial Statements. Hydraulics We classify the key technologies within our Hydraulics segment into two categories based on Hydraulic system architecture: motion control…
- FY2025 10-K: 8 Our PowerView and next generation OpenView lines of LCD displays offer our customers the ability to work with our engineering teams to specify and utilize customized software and graphics for their electronics solutions. Our OpenView displays include the same robust features and quality of our PowerView displays…
- KMT (KENNAMETAL INC)
- FY2025 10-K: …manufacturing capabilities in combination with varying levels of customization to solve our customers' toughest challenges and deliver improved productivity for a wide range of applications . Metal Cutting markets its products under the Kennametal ® , WIDIA ® , WIDIA Hanita ® and WIDIA GTD ® brands through its direct…
- FY2025 10-K: …manufacturing capabilities in combination with varying levels of customization to solve our customers' toughest challenges and deliver improved productivity for a wide range of applications. Metal Cutting markets its products under the Kennametal ® , WIDIA ® , WIDIA Hanita ® and WIDIA GTD ® brands through its direct…
- LECO (LINCOLN ELECTRIC HOLDINGS INC)
- FY2025 10-K: …Actual results may differ materially from those indicated in the forward-looking statements. See "Item 1A. Risk Factors" for more information regarding forward-looking statements. General The Company is a high-performance industrial machinery and technology leader who helps customers manufacture and maintain vital…
- FY2025 10-K: The Company believes it is the world's largest manufacturer of arc welding solutions and has relatively few global broad-line competitors worldwide, but numerous smaller competitors in specific geographic markets. The Company extends its competitiveness in domestic and international markets through high quality,…
- GTES (Gates Industrial Corporation plc)
- FY2025 10-K: …manufacturer of innovative, highly engineered power transmission and fluid power solutions. We offer a broad portfolio of products to diverse aftermarket channel customers, and to original equipment manufacturers ("OEM") as specified components, with the majority of our revenue coming from aftermarket channels. Our…
- FY2025 10-K: …our hydraulic hoses. The ultimate performance of a hydraulic assembly, in which our products function as part of a hydraulic circuit, 8 Table of Content s depends not only on how well the components are made, but also on how well they complement each other. Our hydraulic fittings are manufactured in a wide assortment…
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.
- Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
- 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.
Sources
Q1 fiscal 2027 earnings release, July 8, 2026