DCF Studio

    AOS · NYQ · Industrials

    A. O. Smith Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 98.94

    Market price

    USD 65.42

    Implied upside

    +51.2%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    Value Per Share

    Perpetuity growth
    USD 98.94+51.2%
    Exit multiple
    USD 103.95+58.9%
    Market price
    USD 65.42

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 3.3bnUSD 4.0bnUSD 4.9bnUSD 5.7bnUSD 6.6bnUSD 7.5bnUSD 8.2bnUSD 8.8bnUSD 9.3bnUSD 9.5bn+12.6%
    EBITUSD 614.0mUSD 755.6mUSD 910.5mUSD 1.1bnUSD 1.2bnUSD 1.4bnUSD 1.5bnUSD 1.7bnUSD 1.7bnUSD 1.8bn+12.6%
    NOPATUSD 485.1mUSD 596.9mUSD 719.3mUSD 848.2mUSD 978.5mUSD 1.1bnUSD 1.2bnUSD 1.3bnUSD 1.4bnUSD 1.4bn+12.6%
    Add depreciation & amortisationUSD 68.5mUSD 84.3mUSD 101.6mUSD 119.8mUSD 138.2mUSD 155.9mUSD 171.8mUSD 184.9mUSD 194.3mUSD 199.1m+12.6%
    Less capital expenditureUSD -69.1mUSD -90.9mUSD -116.5mUSD -145.8mUSD -177.8mUSD -211.3mUSD -244.8mUSD -276.4mUSD -303.9mUSD -325.4m+18.8%
    Capex, % of revenue2.1%2.3%2.4%2.5%2.7%2.8%3.0%3.1%3.3%3.4%-
    Less increase in working capitalUSD 70.7mUSD -96.3mUSD -105.3mUSD -111.0mUSD -112.1mUSD -107.7mUSD -97.0mUSD -80.0mUSD -57.1mUSD -29.6m-
    Free cashflow to firmUSD 555.2mUSD 494.1mUSD 599.0mUSD 711.3mUSD 826.8mUSD 940.4mUSD 1.0bnUSD 1.1bnUSD 1.2bnUSD 1.3bn+9.5%
    Discount factor0.95720.87700.80350.73620.67460.61800.56630.51880.47540.4355-
    Present valueUSD 531.5mUSD 433.3mUSD 481.4mUSD 523.7mUSD 557.7mUSD 581.2mUSD 592.4mUSD 590.3mUSD 574.6mUSD 546.2m-
    Present Value Of The ForecastUSD 5.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta1.025Reported 1.037, pulled toward 1.0 (Blume)
    Cost of equity9.23%Risk-free + beta x equity risk premium
    Cost of debt6.60%Interest expense / average total debt
    Market capitalisationUSD 8.8bn97.9% of capital
    Total debtUSD 192.1m2.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.14%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 98.94

    61% of EV

    Forecast FCFF, final year
    USD 1.3bn
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (9.0% of NOPAT)
    USD -126.3m
    Capitalised
    USD 1.3bn
    ROIC (reported)
    27.9%
    Terminal value, undiscounted
    USD 19.8bn
    Terminal value, discounted
    USD 8.6bn
    Enterprise value
    USD 14.0bn
    Less net debt
    USD -1.1m
    Equity value
    USD 14.0bn

    Exit at 10.8x EBITDA

    Value per shareUSD 103.95

    63% of EV

    Terminal value, undiscounted
    USD 21.4bn
    Terminal value, discounted
    USD 9.3bn
    Enterprise value
    USD 14.8bn
    Less net debt
    USD -1.1m
    Equity value
    USD 14.8bn

    Spread between methods: 5%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.14%130.77137.48145.72156.03169.28
    8.14%109.18113.26118.12124.00131.23
    9.14%93.3595.9298.94102.50106.74
    10.14%81.2782.9384.8587.0989.70
    11.14%71.7772.8574.0975.5277.18

    Outlined: this model. Green text: above today's price of 65.42. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year0.7%9.5%4.4%
    EBIT margin19.7%18.7%12.6%
    Discount rate-9.1%12.2%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.