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Applied Industrial Technologies (AIT) Hits Fresh Highs: Is There Still Room to Run?

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Have you been paying attention to shares of Applied Industrial Technologies AIT? Shares have been on the move with the stock up -0.4% over the past month. AIT hit a new 52-week high of $77.15 in the previous session. Applied Industrial Technologies has gained 6% since the start of the year compared to the -7.2% move for the Industrial Products sector and the -2.6% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on August 10, 2018, Applied Industrial Technologies reported EPS of $1.03 versus consensus estimate of $1.01 while it beat the consensus revenue estimate by 1.98%.

For the current fiscal year, Applied Industrial Technologies is expected to post earnings of $4.66 per share on $3.58 billion in revenues.

Valuation Metrics

While AIT has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Applied Industrial Technologies has a Value Score of B. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 15.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 18.4X versus its peer group's average of 17X. Additionally, the stock has a PEG ratio of 1.29. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Applied Industrial Technologies, Inc. Price and Consensus

Applied Industrial Technologies, Inc. Price and Consensus | Applied Industrial Technologies, Inc. Quote

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Applied Industrial Technologies currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Applied Industrial Technologies meets the list of requirements. Thus, it seems as though AIT shares could have a bit more room to run in the near term.


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