Value
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.0 |
| P/S | 8.8 |
| EV/EBITDA | 4.8 |
| Fwd P/E | 7.2 |
| PEG | 5.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 17.3x
- ▸PEG: 1.51
AOS · Why this verdict
Why A.O. Smith (AOS) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
Show full disclosure ▾Hide full disclosure ▴
About TrendMatrix. TrendMatrix is a publisher of general securities research and market commentary. We publish on a regular schedule. All content is the same for every subscriber in a tier — we do not provide personalized investment advice and we do not take into account any individual subscriber's financial situation, investment objectives, risk tolerance, tax situation, or holdings.
Not investment advice. TrendMatrix is not a registered investment adviser. Our content is for informational and educational purposes only. Consult your own licensed investment adviser, broker, or tax professional before making any investment decision.
Conflicts and positions. People who build TrendMatrix, or entities they control, may hold positions, long or short, in securities it covers, and may trade them at any time. Positions are not disclosed individually. Verdicts are generated by an automated model applied by the same rules to every covered stock, and are not adjusted for any position held by the people who build TrendMatrix. We do not accept payment from issuers for coverage.
No paid promotion. TrendMatrix does not accept payment from any issuer, broker, or third party in exchange for coverage of any security.
No fiduciary duty. No fiduciary, advisory, or agency relationship is created between you and TrendMatrix by reading our content or subscribing to our service.
Performance. Past performance is not indicative of future results. Performance figures reflect the published model only and do not reflect any individual subscriber's actual results.
VerdictSELL
Overall score5.4/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
A.O. Smith is a solid industrial with a 27% ROE and a dividend-aristocrat record, but growth is flat and the price of $63.07 already sits above the $57.68 analyst target after an overbought run.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The stock is overbought (RSI 77) with falling on-balance volume and a flat or negative 200-day slope, signaling late-cycle distribution risk. Momentum breakdown | The price holds above the $59.67 stop while RSI cools below 70. | →Stable |
| CounterOverbought readings with distribution volume often precede a pullback, particularly with the price above the analyst target. | ||
A.O. Smith earns a 27% return on equity with a 7/9 Piotroski F-Score and a superior ROE versus peers. Quality breakdown | ROE stays above 22% over the next 12 months. | →Stable |
| CounterMoat score is only 5.8 and a mature water-heater market limits how long high returns can be defended. | ||
The price of $63.07 is 8.5% above the $57.68 analyst target, leaving negative upside against 14% downside. Targets | Analyst targets rise above $65 or the price pulls back toward the target. | ↓Deteriorating |
| CounterAnalysts may be slow to raise targets after a rally, but a reward-to-risk of -0.61 leaves no cushion if earnings disappoint. | ||
The company beat EPS in 3 of the last 4 quarters, including $0.93 versus $0.89 on 2026-10-29, though the April report was a 9.9% miss. Earnings | EPS beats continue at the next report on 2027-01-28. | →Stable |
| CounterAverage surprise is only 3.1%, so the beats are narrow and one more miss would break the pattern. | ||
Revenue is slightly declining and growth scores only 2.1/10, with 78% of exposure concentrated in North America. Bear case | Revenue growth turns positive and exceeds 3% YoY. | ↓Deteriorating |
| CounterWith growth near zero and a forward P/E of 15.6x, there is little to support further multiple expansion. | ||
The stock is overbought (RSI 77) with falling on-balance volume and a flat or negative 200-day slope, signaling late-cycle distribution risk.
→StableMomentum breakdown
- Expectation
- The price holds above the $59.67 stop while RSI cools below 70.
CounterOverbought readings with distribution volume often precede a pullback, particularly with the price above the analyst target.
A.O. Smith earns a 27% return on equity with a 7/9 Piotroski F-Score and a superior ROE versus peers.
→StableQuality breakdown
- Expectation
- ROE stays above 22% over the next 12 months.
CounterMoat score is only 5.8 and a mature water-heater market limits how long high returns can be defended.
The price of $63.07 is 8.5% above the $57.68 analyst target, leaving negative upside against 14% downside.
↓DeterioratingTargets
- Expectation
- Analyst targets rise above $65 or the price pulls back toward the target.
CounterAnalysts may be slow to raise targets after a rally, but a reward-to-risk of -0.61 leaves no cushion if earnings disappoint.
The company beat EPS in 3 of the last 4 quarters, including $0.93 versus $0.89 on 2026-10-29, though the April report was a 9.9% miss.
→StableEarnings
- Expectation
- EPS beats continue at the next report on 2027-01-28.
CounterAverage surprise is only 3.1%, so the beats are narrow and one more miss would break the pattern.
Revenue is slightly declining and growth scores only 2.1/10, with 78% of exposure concentrated in North America.
↓DeterioratingBear case
- Expectation
- Revenue growth turns positive and exceeds 3% YoY.
CounterWith growth near zero and a forward P/E of 15.6x, there is little to support further multiple expansion.
Per-dimension breakdown
Quality
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 9.0 |
| ROA | 8.4 |
| Gross margin | 3.7 |
| Op margin | 7.5 |
| Net margin | 6.5 |
| Current ratio | 5.9 |
| FCF quality | 6.4 |
| Moat | 5.8 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 27%
- ▸Strong Piotroski F-Score: 7/9
Growth
2.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.5 |
| EPS growth | 1.8 |
- ▸Declining revenue: -0%
Momentum
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.4 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 8.0 |
| Volume | 0.0 |
- ▸Overbought (RSI 72)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.4 |
| Analyst rating | 5.0 |
| Price target | 5.6 |
Insider
6.6/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 7.7 |
| notable moves | 7.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
- ▸Institutions accumulating
Peer rank
5.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.9 |
| quality rank | 7.6 |
| growth rank | 1.5 |
- ▸Attractive P/E vs peers
- ▸Superior ROE vs peers
Technical
2.9/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.4 |
| support resistance | 1.4 |
| 52w position | 5.9 |
Risk (lower is worse)
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 4.4 |
| days to cover | 3.3 |
| volatility | 5.3 |
| put call | 7.8 |
| implied vol | 5.5 |
| beta | 6.9 |
| debt equity | 8.4 |
- ▸Concentration risks: 1 HIGH, 1 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 3.5 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 4.1 |
| dividend safety | 8.0 |
| news activity | 8.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend aristocrat: 2.3% yield
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:6.5>=5.5
- INSIDER:OK
- NEWS_BOOST:ANALYST:0.60
- EARNINGS_PROXIMITY:85d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.7=NEGATIVE
Warning (2)
- DEATH_CROSS:momentum=6.5>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.65
Upside
-9.7%
Downside
15.0%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 72
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.7 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 6.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.7=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.65 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 6.8, Insider at 6.6, and Momentum at 6.5; the weakest are Growth at 2.1, Technical at 2.9, and Sentiment at 5.6. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of -0.65 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1High Return Quality Franchise
Trip ifReturn on equity falls below 20% from current 27%.
- P2Price Above Analyst Target
Trip ifPrice falls below the $59.67 stop level.
- P3Mostly Positive Earnings Record
Trip ifEPS surprise stays below 0% for 2 consecutive quarters.
- P4Flat Growth North America Concentration
Trip ifRevenue growth falls below -3% YoY for 2 consecutive quarters.
- P5Overbought Late Cycle Distribution
Trip ifRSI stays above 80 while on-balance volume keeps falling for 2 more weeks.