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Applied Industrial Technologies, Inc. (AIT) Hits Fresh High: Is There Still Room to Run?

Have you been paying attention to shares of Applied Industrial Technologies (AIT)? Shares have been on the move with the stock up 5% over the past month. The stock hit a new 52-week high of $156.53 in the previous session. Applied Industrial Technologies has gained 20.2% since the start of the year compared to the 10.8% move for the Zacks Industrial Products sector and the 13.1% return for the Zacks Manufacturing - General Industrial industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 10, 2023, Applied Industrial Technologies reported EPS of $2.35 versus consensus estimate of $2.18 while it beat the consensus revenue estimate by 3.66%.

For the current fiscal year, Applied Industrial Technologies is expected to post earnings of $8.92 per share on $4.53 billion in revenues. This represents a 1.94% change in EPS on a 2.65% change in revenues. For the next fiscal year, the company is expected to earn $8.53 per share on $4.48 billion in revenues. This represents a year-over-year change of -4.37% and -1%, respectively.

Valuation Metrics

Applied Industrial Technologies may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort 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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

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

In terms of its value breakdown, the stock currently trades at 17X current fiscal year EPS estimates, which is not in-line with the peer industry average of 19.8X. On a trailing cash flow basis, the stock currently trades at 14.7X versus its peer group's average of 12.7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Applied Industrial Technologies currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

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 passes the test. Thus, it seems as though Applied Industrial Technologies shares could still be poised for more gains ahead.

How Does AIT Stack Up to the Competition?

Shares of AIT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Mitsubishi Heavy Industries, Ltd. (MHVYF). MHVYF has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of A, and a Momentum Score of C.

Earnings were strong last quarter. Mitsubishi Heavy Industries, Ltd. beat our consensus estimate by 102.70%, and for the current fiscal year, MHVYF is expected to post earnings of $4.15 per share on revenue of $30.65 billion.

Shares of Mitsubishi Heavy Industries, Ltd. have gained 17% over the past month, and currently trade at a forward P/E of 12.96X and a P/CF of 8.52X.

The Manufacturing - General Industrial industry is in the top 30% of all the industries we have in our universe, so it looks like there are some nice tailwinds for AIT and MHVYF, even beyond their own solid fundamental situation.

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