A. O. Smith scores 100 for management and 62 for moat. The management score rests on a return on invested capital of 23.9% and a gross margin of 38.8% — figures that describe a business turning capital into profit efficiently. Debt sits at 0.10x equity. A solid moat alongside exceptional management is a combination worth understanding before the price matters at all.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 5.8% a year, below the 6.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 11.5x. That produces an intrinsic value of $17.88, a 10-CAP price of $47.31 and a payback time price of $49.09, with the value zone set at the highest of the three, $49.09. Today's price of $56.67 sits 15% above it.
A wonderful business at the wrong price is still the wrong price. A. O. Smith scores well on the business and poorly on the entry point, which is the most common shape in a long bull market.
| Price | $56.67 |
| Market cap | $7.9B |
| P/E ratio | 15.8x |
| Return on invested capital | 23.9% |
| Gross margin | 38.8% |
| Debt to equity | 0.10x |
| Free cash flow yield | 5.8% |
| Growth rate used | 5.8% |
| Growth rate measured | 6.0% |
| Exit multiple assumed | 11.5x |
| Company | Moat | Buy price |
| Pentair (PNR) | 69 | $46.42 |
| Jbt Marel Corp (JBTM) | 57 | $104.28 |
| Donaldson Co Inc (DCI) | 75 | $40.40 |
| Badger Meter Inc (BMI) | 100 | $84.03 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of A. O. Smith rather than accepting ours.