Start here if you're new
what it is
It sells the parts and systems factories need to keep machines moving, fluids flowing, and automation running.
how it gets paid
Trailing annual sales sit around the mid‑$4B range; segment bars below are illustrative product mix, not a substitute for the 10‑K breakout.
why it's growing
FY2026 guidance (Jan 2026) points to total sales growth of roughly 5.5%–7.0% with organic growth ~2.5%–4.0% — acquisitions fill in the rest.
what just happened
Q2 fiscal 2026 (reported Jan 27, 2026): net sales ~$1.2B (+~8.4% YoY); diluted EPS ~$2.51 (+~4.6% YoY).
At a glance
B++ balance sheet — above average — nothing keeping you up at night
25/100 earnings predictability — expect surprises
26.0x trailing p/e — priced about right
0.7% dividend yield — cash in your pocket every quarter
13.5% return on capital — nothing to write home about
xvary composite: 67/100 — average
What they do
It sells the parts and systems factories need to keep machines moving, fluids flowing, and automation running.
When your line is down, you do not shop around for bearings and hydraulics for three days. You call the distributor that already knows your plant. Applied has about 600 service locations and 6,500 employees, and that local reach plus repair, assembly, and inventory support makes switching costs (changing suppliers) real pain for your maintenance team.
How they make money
$4.6B
annual revenue · their business grew +1.9% last year
bearings
$1.4B
power transmission
$1.1B
fluid power components and systems
$1.0B
automation systems
$0.7B
flow control and services
$0.4B
The products that matter
distributes industrial components
Motion and Power Control Distribution
$4.6B revenue
It's the whole $4.6B business. That concentration keeps the story simple: if factory activity improves, you feel it everywhere. If industrial demand softens, you feel that everywhere too.
100% of revenue
Key numbers
13.5%
return on capital
Return on capital → profit earned on the money used in the business → Applied is turning every $1 invested into $0.135 of operating return.
$572M
long-term debt
Long-term debt → money owed over many years → balance-sheet pressure looks modest because debt is only 5% of capital.
26.0x
trailing p/e
P/E → price divided by yearly profit → you are paying a premium for a distributor growing sales just 1.9% last year.
0.7%
dividend yield
Dividend yield → cash paid to shareholders each year → your return here depends far more on price gains than income.
Financial health
B++
strength
- balance sheet grade B++ — above average financial health
- risk rank 3 — safer than 50% of stocks
- price stability 70 / 100
- long-term debt $572M (5% of capital)
- net profit margin 8.9% — keeps 9 cents of every dollar in revenue
- return on equity 16% — $0.16 profit for every $1 investors have put in
B++ — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in AIT 3 years ago → it's now worth $21,500.
The index would have given you $13,920.
source: institutional data · total return
What just happened
beat estimates
Q2 fiscal 2026: net sales ~$1.2B; diluted EPS ~$2.51.
Reported Jan 27, 2026. Sales rose ~8.4% YoY (organic ~2.2% with acquisitions adding ~6 pts). EPS rose ~4.6% YoY; the quarter generally cleared the sell-side EPS bar. Updated FY2026 EPS guidance was $10.45–$10.75 with sales growth guided ~5.5%–7.0%.
$1.2B
Q2 FY'26 sales
$2.51
diluted EPS
~8.4%
sales vs PY
the number that mattered
Organic ~2% vs. acquisition‑aided total ~8% — how much is end demand vs. deal math.
-
the company is off to a solid start with sales growth of 9% and earnings-per-share improvement of 11% in the september period.
-
we expect applied to continue to benefit from good results at its service center business.this is the company's largest segment and it operates more than 400 facilities in north america, australia, and new zealand. these centers provide critical maintenance supplies for industrial equipment, and their close proximity to customers is a key competitive advantage. applied is also focusing on cross-selling products from its expanded portfolio of fluid power, flow control, and consumable offerings.
-
we anticipate a sixth-consecutive year of earnings growth in fiscal 2026, with the bottom line expected to reach $10.50 a share.
-
the hydradyne acquisition should make an increasing contribution to profits in coming quarters.it has been nearly a year since ait brought the company into the fold, and it has taken time and money to integrate the business.
-
however, cost and sales growth are beginning to be realized.the profit contribution from the asset was up double-digits sequentially in the latest period, and we expect further progress this year.
source: Applied Industrial Technologies Q2 fiscal 2026 results (Jan 27, 2026) — Nasdaq press release · ir.ait.com
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What could go wrong
AIT's risk is not mysterious. You need a premium multiple, a one-engine business, and an industrial cycle that cooperates at least a little.
med
industrial demand stays soft
This is a one-engine business. If plant maintenance, repair, and production activity slow, the pressure lands on the whole $4.6B revenue base.
Impact: 100% of revenue is tied to the same broad industrial backdrop.
med
cost pressure eats into thin distribution economics
Distribution margins are not giant to begin with. With an 8.3% net margin, you do not need a dramatic sourcing or freight shock to make the income statement look worse quickly.
Impact: even modest cost inflation matters when the company keeps only about 8 cents of every dollar.
med
the stock is priced for cleaner growth than you just saw
AIT trades at 26.0x trailing earnings after a year of 1.9% revenue growth. If growth stays slow, investors will ask why a distributor deserves a premium compounder multiple.
Impact: valuation compression hurts even if the business stays fundamentally okay.
med
low predictability leaves less room for an ugly quarter
A 25/100 earnings predictability score is a warning label. The business feels steady in theory, but the actual quarter-to-quarter path is bumpier than the brand name suggests.
Impact: when a premium stock misses, the market usually cuts the multiple first and asks questions second.
Here's what would break the cleaner version of the story: growth stuck near 1.9% and margins slipping below the recent 8%–9% range. If that happens, you stop debating upside and start debating multiple compression.
source: institutional data · regulatory filings · risk analysis
Pay attention to
trend
whether growth actually moves above 1.9%
The whole debate is simple. If AIT cannot grow meaningfully faster than last year's 1.9%, the premium multiple starts looking generous instead of justified.
metric
margin holding in the 8%–9% zone
An 8.6% quarterly margin and 8.3% net margin tell you profitability is holding. If that slips, the valuation has less to stand on.
risk
institutional buyers stopping the slow drift out
There were 262 buyers versus 274 sellers in 3Q2025. That is not a stampede, but it is not broad accumulation either.
calendar
the next revenue print
The latest quarter grew faster than the full year. You want to know if that was a real turn or just one cleaner comparison.
Analyst rankings
short-term outlook
top 20%
momentum score 2 — in human-speak, analysts think AIT has better near-term price potential than most stocks.
risk profile
average
stability score 3 — typical risk profile. Not fragile, not a bunker.
chart momentum
average
technical score 3 — the chart is acting normal. No dramatic signal either way.
earnings predictability
25 / 100
Low predictability means quarterly results move around more than you might want from a supposedly steady distributor.
source: institutional data
Institutional activity
262 buyers vs. 274 sellers in 3q2025. total institutional holdings: 35.2M shares.
source: institutional data
Price targets
3-5 year target range
$201
$377
$263
current price
$289
target midpoint · +10% from current · 3-5yr high: $370 (+40% · 10% ann'l return)
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