AZZ INC. (AZZ): what the price requires
At today's price, AZZ INC. (AZZ) is priced for +18.7% growth. 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: 2026-07-14 · Source: https://boothcheck.com/report/AZZ
Headline
| Field | Value |
|---|---|
| Ticker | AZZ |
| Company | AZZ INC. |
| Current price | $145.36/sh |
| Composition | Construction 56% / Industrial 9% / Consumer 8% / Transportation 10% / Electrical 9% / Other 8% |
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 | 4.9% |
| Operating margin today | 15.9% |
| Margin compression implied | -11.0pp |
| Implied growth | 18.7% |
| Multiple paid | 20x operating income |
The operating-margin requirement is derived from the framework's value band at year 11, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.6% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.9pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.20σ |
| cohort percentile (of 225 peers) | 43 |
| sustained it ~5 years at this level | 39% |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
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 | 1.28x | 5 | expensive |
| Earnings | 1.06x | 5 | expensive |
| Relative | 1.06x | 5 | expensive |
| Growth | 0.87x | 3 | justifies |
Families that justify the price: Earnings, Relative, Growth
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=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $295.43 | 0.49x | yes | FCF base $0.4B, growth 5% (input: historical growth), terminal g 4.0%, WACC 8.4%, 6yr projection |
| DCF Exit Multiple | Growth | $167.37 | 0.87x | yes | Exit EV/EBITDA: 11.9x / 13.9x / 15.9x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $160.89 | 0.90x | yes | 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 | $113.58 | 1.28x | yes | BV/sh $44.28, ROE (TTM) 23.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $181.94 | 0.80x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $101.82 | 1.43x | yes | Rev $1.7B, growth 5% (input: historical growth; tapered), Terminal P/S: 2.2x / 2.7x / 3.1x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $126.00 | 1.15x | yes | EPS $10.50, growth 2% (input: historical EPS growth), PEG=8.62 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $40.23 | 3.61x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.24B × (1−35%) / WACC 8.4% → EPV (no growth) |
| Residual Income | Asset | $166.16 | 0.87x | yes | BV $44.28 + 5yr PV of (ROE (TTM) 23.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $102.27 | 1.42x | yes | √(22.5 × EPS $10.50 × BVPS $44.28) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $123.59 | 1.18x | yes | EBITDA $0.35B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $141.84 | 1.02x | yes | FCF $444.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $136.53 | 1.06x | yes | SBC-adj FCF $0.43B (FCF $0.44B − SBC $0.01B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $338.80 | 0.43x | yes | EPS $10.50 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $10.47 | 13.88x | yes | BV $44.28 × (ROIC 2.0% / WACC 8.4%) |
| P/Sales Sector | Relative | $136.61 | 1.06x | yes | Revenue $1.65B × sector P/S 2.5x |
| PEG Fair Value | Relative | $393.75 | 0.37x | yes | EPS $10.50 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $113.51 | 1.28x | yes | EPS $10.50 / 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 | $490.8m |
| Net debt / NOPAT (after-tax) | 2.85x |
| Net debt / operating income (pre-tax) | 1.84x |
| Interest coverage | 4.2x |
| Share count CAGR (dilution) | 4.9% |
| Burning cash | no |
Bullet Takeaways
- AZZ is two coatings businesses bolted together: hot-dip galvanizing in Metal Coatings, where the company runs a 31% EBITDA margin protecting steel for infrastructure customers, and coil coating in Precoat Metals, a lower-margin volume business at 19.8% EBITDA tied to construction and transportation demand.
- The biggest near-term risk is leverage layered on a cyclical bottom: net debt sits near 1.9x trailing operating income while Precoat volumes fell on softer construction and transportation end markets, so a deeper or longer downturn in those markets squeezes the segment carrying half of revenue.
- Watch the galvanizing capacity ramp and the Precoat volume line: management is investing into Metal Coatings while coil-coated volume is the swing factor, and the next print shows whether construction demand is stabilizing or eroding further.
Bull Case
The structural advantage here is not a technology or a brand. It is geography and the chemistry of rust. Hot-dip galvanizing protects steel by dipping it in molten zinc, and the economics only work when the galvanizing plant sits close to the fabricator, because shipping heavy steel structures long distances eats the savings. AZZ runs a national network of galvanizing plants, and that network is the moat: a customer fabricating transmission towers, highway guardrail, or structural steel buys from whoever is nearest, and AZZ is nearest in more places than anyone else. The result shows up in the margin. Metal Coatings posted a 31.0% EBITDA margin in fiscal 2026 on $758.7 million of sales, which is the kind of profitability that comes from local pricing power, not from a commodity service. The 10-K describes the strategy plainly as "Driving profitable growth in our AZZ Metal Coatings and AZZ Precoat Metals segments", and the galvanizing half is delivering it.
The second business is different and that is the point. Precoat Metals applies paint to steel and aluminum coil before it is formed into building panels, appliances, and truck bodies. It is a toll-coating model, meaning AZZ coats metal the customer owns, which keeps raw-material exposure low. The filing notes that for the coil-coating process "paint and customer-owned substrate availability are important for our toll-coating process" and that the company "carr[ies] limited risk associated with paint cost" because it does not own the steel passing through its lines. That structure means Precoat earns a spread on volume without carrying the inventory swings a steel processor would. At a 19.8% EBITDA margin on $891.4 million of sales, it is the larger but thinner of the two, and when construction demand returns the operating leverage on those coating lines is real.
The whole company grew sales 4.6% to a record $1.65 billion in fiscal 2026 with adjusted diluted EPS up 19% to $6.19, a result driven by the galvanizing side carrying the year while coil volume softened. The valuation methods that anchor on book value plus profitability, peer multiples, and exit-multiple cash flow all cluster within reach of the price, which says the market is paying for a real, cash-generative industrial rather than a growth story. Infrastructure spending on bridges, transmission, and renewables all feed galvanized steel demand, and AZZ sits at the point in the supply chain where that steel has to be protected before it goes in the ground.
Bear Case
The competitive pressure does not come from a new entrant with better technology. It comes from the demand cycle and the balance sheet meeting at the wrong time. Precoat Metals is the larger segment, and its sales fell in fiscal 2026 on lower coil volume, which management attributed to weakness in construction and transportation end markets. Coil coating is a volume business: the lines have fixed cost, and when fewer tons run through them the margin compresses faster than revenue. The 10-K leans on customer behavior to argue the demand holds, noting "Customer inventories for our AZZ Precoat Metals segment remain at historical levels, which should support the continued demand for our coil coating solutions." That is a reasonable hope, not a guarantee, and it depends on construction activity that AZZ does not control.
The leverage is what turns a cyclical soft patch into a real concern. AZZ carries net debt of roughly $491 million against trailing operating income, putting net debt near 1.9x operating profit and interest coverage at about 4.8 times. That is manageable in a good year and uncomfortable in a bad one, and the company is investing into galvanizing capacity at the same time it is carrying that debt. If Precoat volumes keep sliding while the capital goes into the other segment, the consolidated cash generation has to cover both the debt service and the expansion, with one of the two engines running below capacity.
The price compounds the question. At today's level the market is paying roughly 21 times company-wide operating income, which embeds operating-profit growth of about 21.7% a year sustained for five years. AZZ has delivered growth at that rate in spells, so the rate itself is not the stretch; the duration is. Of comparable fast-growers, only about a third sustained that pace for five years, and AZZ is a coatings business levered to construction and infrastructure cycles, not a secular grower. Raw-material exposure adds to the risk: the filing flags "indirect exposure to copper, aluminum, steel" and energy costs that are "beyond our control" and affected by supply, demand, and freight. Zinc for galvanizing and energy for the furnaces are real cost lines, and the toll model that shields Precoat from steel prices does not shield the galvanizing furnaces from the price of zinc and gas. If the duration of the priced-in growth shortens, the multiple compresses against an earnings stream that is more cyclical than the price assumes.
Valuation
At today's price the market is paying about 21 times company-wide operating income, and inverting that into a growth path implies the business must compound operating profit at roughly 21.7% a year for about five years. The rate is within what AZZ has produced in good stretches; the demanding part is the persistence. Coatings demand follows construction and infrastructure cycles, and asking a cyclical industrial to grow operating profit at better than 20% for half a decade is a bet on the duration of the current up-cycle more than on the rate itself.
What keeps this from looking like a pure growth bet is where the methods land. The price sits close to the peer-multiple read (relative valuation lands within a few percent of the price at an 18x sector P/E) and close to the exit-multiple cash-flow read, while the book-value-plus-profitability methods land below it and the perpetual-growth cash flow lands well above. That spread is the signal: the price is supported by earnings power and peer multiples, not floating on forward-growth optimism alone. The asset-value lens, anchored on book value per share around $44 and a trailing return on equity near 24%, reads the price as a premium to demonstrated book economics, which is the honest tension. You are paying up for a coatings franchise that earns well above its cost of equity, and the methods that credit that profitability reach the price while the ones that ignore growth do not.
Solvency frames the downside. Net debt of roughly $491 million against trailing operating income puts leverage near 1.9x operating profit, with interest coverage around 4.8 times and a share count drifting up rather than down. That is a balance sheet that works in a normal year and tightens in a weak one, particularly while management funds galvanizing expansion. The most decisive point for AZZ is not a single margin target. It is that the segment carrying half the revenue, Precoat coil coating, is the one currently running below its potential on soft construction volume, so the price's bet on durable growth rests on a recovery in exactly the end markets that softened this year.
Catalysts
AZZ closed fiscal 2026 (ended February 2026) with record full-year sales of $1.65 billion, up 4.6%, and adjusted diluted EPS of $6.19, up 19.0%, with the gain driven by organic growth in galvanizing. The quarter underneath the year told the same divergent story: total fourth-quarter sales rose 9.4% to $385.1 million, but the mix was lopsided, with Metal Coatings up 25.7% to $186.5 million while Precoat Metals slipped 2.4% to $198.6 million. Consolidated adjusted EBITDA reached $367.6 million, or 22.3% of sales. The galvanizing acceleration against the coil-coating decline is the central tension to track in the next several prints.
The forward catalyst is the galvanizing capacity investment. Management is ramping spending on Metal Coatings while that segment is already running a 31% EBITDA margin and growing volume in the mid-twenties, a deliberate decision to lean into the side of the business that is working. The investment matters two ways: it should extend the galvanizing network advantage, and it draws on the same cash flow that services the debt, so execution and timing are both worth watching.
The near-term variable is construction and transportation demand feeding Precoat. The segment's fiscal 2026 sales decline came from lower coil volume in those end markets, and the recovery, if it comes, shows up first as volume returning to the coating lines before it shows up in margin. The next quarterly report is the cleanest read on whether that volume is stabilizing or continuing to erode.
Peer Cohorts (Per Segment, With Filing Citations)
Metal Coatings / Precoat Metals (reported)
- VMI (VALMONT INDUSTRIES INC)
- (no filing in the citation store)
- SSD (Simpson Manufacturing Co., Inc.)
- (no filing in the citation store)
- MWA (MUELLER WATER PRODUCTS, INC.)
- (no filing in the citation store)
- TKR (TIMKEN CO)
- (no filing in the citation store)
- HLIO (HELIOS TECHNOLOGIES, INC.)
- (no filing in the citation store)
- KMT (KENNAMETAL INC)
- (no filing in the citation store)
- LECO (LINCOLN ELECTRIC HOLDINGS INC)
- (no filing in the citation store)
- GTES (Gates Industrial Corporation plc)
- (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.
Sources
AZZ Q4 FY2026 earnings release, April 2026 · AZZ FY2025 10-K segment disclosure · AZZ fiscal 2026 results commentary