AAON
AAON
$75.01
+19.31%
AAON, Inc. designs, engineers, and manufactures semi-custom and custom HVAC equipment — rooftop units, chillers, air-handling units, energy-recovery units, geothermal heat pumps, and coils — sold primarily into commercial and industrial end markets through three reporting segments: AAON Oklahoma (the largest), AAON Coil Products, and BASX. The company occupies a differentiated niche as a premium, engineer-to-order equipment provider rather than a volume-driven commodity manufacturer, with a customer base skewed toward data centers, schools, healthcare, and industrial process cooling where reliability and customization command pricing power. The current investor debate has shifted sharply from growth enthusiasm to margin durability: after a period of strong data-center-driven order momentum, the narrative is now dominated by a violent de-rating in the shares, a gross margin that has compressed from roughly 35% in mid-2024 to about 24% in the latest quarter, and a deeply negative trailing free cash flow profile driven by heavy capacity capex. Bulls point to a still-growing top line and a forward EPS estimate near $4.55 against a depressed share price; bears focus on the margin trajectory, cash burn, and the risk that hyperscale data-center ordering has peaked.…
AAON
AAON
$75.01
Related headlines
Investment Opinion: Should I buy AAON Today?
Rating: Hold. AAON is a premium, engineer-to-order HVAC franchise trading at roughly 12.6x consensus forward EPS of $4.545 (at $57.19), but that multiple is only cheap if a gross margin that has collapsed from 34.88% in Q3 2024 to 24.32% in Q2 2026 inflects upward — a recovery the current trajectory does not yet support. The qualitative analyst signal is uniformly bullish (Oppenheimer Outperform reiterated October 14, 2026; Baird Outperform August 11, 2026; DA Davidson Buy), but with only 2 analysts and no published average price target, the consensus cannot serve as a valuation anchor.
Supporting evidence cuts both ways. On the positive side, Q2 2026 revenue of $626.98M grew 101.23% YoY and rose 47.8% sequentially over two quarters from $424.22M in Q4 2025; Q2 EPS of $0.69 versus $0.19 a year earlier shows operating leverage still exists; the balance sheet is solid with a current ratio of 2.63 and debt-to-equity of 0.47; and the forward multiple of ~12.6x compares favorably to the 57.77x trailing PE and a machinery sector average in the low-20s. On the negative side, trailing FCF is -$118.79M across four consecutive negative quarters, gross margin sits at 26.75% TTM versus 30%+ in 2023-2024, EV/EBITDA of 29.41x and P/B of 6.95x remain premium versus machinery norms of roughly 2-4x book, and the stock's -63.29% max drawdown with a -34.36% one-month decline shows selling is accelerating, not stabilizing.
The biggest risks that could invalidate the thesis are (1) gross margin failing to hold above 24%, which would break the $4.545 EPS consensus and remove the only valuation support; (2) continued capex ($52.16M in Q2 2026) without an FCF inflection, forcing external financing at a depressed share price with only $12.73M of cash on hand; and (3) a slowdown in hyperscale data-center ordering, the demand driver behind the recent order momentum. This Hold would upgrade to Buy if gross margin prints a sequential increase toward the mid-20s and the $54.42 November 5 low holds on a closing basis, or downgrade to Sell if gross margin falls below 24% or forward EPS estimates are cut. Verdict: the stock has already de-rated from high-growth compounder to cyclical industrial (PS down from 32.15x in Q4 2024 to 4.31x), making it fairly valued on forward earnings but still expensive on trailing and EV/EBITDA metrics — a binary bet on margin recovery rather than a clean bargain.
Sign up to view all
AAON 12-Month Price Forecast
AAON presents a genuinely two-sided setup: the forward valuation of ~12.6x is undemanding if the $4.545 consensus EPS is achieved, and revenue momentum (Q2 2026 up 101.23% YoY, 47.8% sequentially over two quarters) plus a solid balance sheet (current ratio 2.63, debt-to-equity 0.47) argue the demand and liquidity are there. Against that, the margin collapse to 24.32% gross, four straight quarters of negative FCF totaling -$118.79M, and premium EV/EBITDA of 29.41x mean the market is right to demand proof before paying up. The -63.29% max drawdown and -34.36% one-month decline suggest capitulation may be near, but the 5.09% bounce off the $54.42 low is a single session, not a confirmed bottom. I would upgrade to bullish on a sequential gross margin increase above 25% combined with a closing hold of $54.42 and a reclaim of the $67-70 shelf; I would downgrade to bearish if gross margin breaks below 24% or forward EPS estimates are cut.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on AAON's 12-month outlook, with a consensus price target around $127.00 and implied upside of +69.3% versus the current price.
Average Target
$127.00
6 analysts
Implied Upside
+69.3%
vs. current price
Analyst Count
6
covering this stock
Price Range
$104 - $154
Analyst target range
Coverage is thin, with only 2 analysts providing estimates, and the available institutional ratings are uniformly bullish: Oppenheimer reiterated Outperform on October 14, 2026, Baird reiterated Outperform on August 11, 2026, and DA Davidson maintained Buy in February 2026, with no downgrades in the visible record. The consensus EPS estimate of $4.545 (range $4.438-$4.661) and revenue estimate of $3.148 billion (range $3.090-$3.206 billion) imply analysts expect a substantial earnings recovery from the current trailing EPS of $0.017, which at $57.19 would put the stock at roughly 12.6x forward earnings. However, no average price target is provided in the data, so implied upside cannot be calculated; the qualitative signal from the ratings is bullish, but the quantitative signal is absent.
The target range for EPS ($4.438 to $4.661) and revenue ($3.090 billion to $3.206 billion) is remarkably tight — a spread of only about 5% on EPS and 4% on revenue — which signals high conviction in the near-term numbers but says nothing about the multiple the market will pay for them. The high end assumes margins recover toward the mid-20s gross margin level and revenue reaches $3.206 billion, while the low end implies a slower ramp to $3.090 billion; neither scenario prices in a further collapse in gross margin below 24%. The critical caveat is that with only 2 analysts, the consensus is statistically fragile, and the absence of any price target data means investors should treat the bullish ratings as directional rather than as a valuation anchor — limited coverage of this kind typically accompanies higher volatility and less efficient price discovery, both of which are clearly on display in AAON's 63% drawdown.
Bulls vs Bears: AAON Investment Factors
The bear case currently has stronger evidence: gross margin has compressed roughly 1,050bps over seven quarters to 24.32%, free cash flow is -$118.79M on trailing basis, and the stock's -63.29% max drawdown with accelerating downside momentum (-34.36% in one month) confirms a company-specific de-rating rather than a market-driven pullback. The bull case rests almost entirely on the forward EPS estimate of $4.545, which would put the stock at 12.6x earnings — but that number requires a margin recovery the current trajectory does not yet support. The single most important tension is whether the 24.32% gross margin is a cyclical trough tied to ramping new capacity or a structural reset driven by pricing pressure and unfavorable mix; if margins inflect toward the mid-20s, the forward multiple is compelling, but if they erode further, the premium EV/EBITDA of 29.41x leaves substantial downside. Until a higher low is established and margins show a sequential uptick, the evidence favors caution over conviction.
Bullish
- Forward EPS implies 12.6x multiple: At $57.19 with consensus forward EPS of $4.545, AAON trades at roughly 12.6x forward earnings — a steep discount to its 57.77x trailing PE and to a machinery sector average in the low-20s. If the two covering analysts are right, the market is pricing a margin recovery that hasn't shown up yet, creating asymmetric upside if gross margin stabilizes.
- Revenue still ramping sequentially: Revenue rose from $424.22M in Q4 2025 to $496.94M in Q1 2026 to $626.98M in Q2 2026, a 47.8% sequential increase over two quarters, and Q2 grew 101.23% YoY. Even discounting the weak prior-year base, the absolute dollar trajectory shows demand for AAON's semi-custom HVAC equipment has not collapsed.
- Operating leverage intact on volume: Q2 2026 EPS of $0.69 versus $0.19 a year earlier, with net income of $56.66M on a 9.04% net margin, demonstrates that incremental volume still converts to earnings. Operating income of $68.88M (10.99% margin) shows the cost structure can generate profit even at a compressed 24.32% gross margin.
- Balance sheet supports the trough: A current ratio of 2.63 and debt-to-equity of 0.47 give AAON room to fund its capex program without distress, and ROE of 12.02% remains respectable. The 30.30% payout ratio on a 0.52% dividend yield means the dividend is small but not at risk, preserving optionality through the margin trough.
Bearish
- Gross margin erosion of ~1,050bps: Gross margin fell from 34.88% in Q3 2024 to 27.81% in Q3 2025 to 25.15% in Q1 2026 to 24.32% in Q2 2026 — a roughly 1,050-basis-point compression over seven quarters. The current 26.75% gross margin and 10.56% operating margin are below the 30%+ levels AAON commanded in 2023-2024 and below premium HVAC peer norms.
- Persistent negative free cash flow: Trailing FCF is -$118.79M, with four consecutive negative quarters: -$31.18M in Q2 2026, -$11.13M in Q1 2026, -$43.18M in Q4 2025, and -$33.30M in Q3 2025. Capex of $52.16M, $45.13M, $62.50M, and $45.55M respectively has overwhelmed thin operating cash flow of $20.97M, $33.99M, $19.32M, and $12.26M.
- Valuation still premium on most metrics: EV/EBITDA of 29.41x, PS of 4.31x, and P/B of 6.95x are all above typical machinery-sector levels of roughly 1.5-2.5x sales and 2-4x book. The trailing PE of 57.77x is more than 100% above a sector average in the low-20s, so the stock is only cheap if the forward EPS estimate is achieved.
- Severe downtrend with no bottom confirmed: The stock is down 59.05% over six months and 42.83% over a year, with a -63.29% max drawdown and a -52.42-point relative strength gap versus SPY. The 1-month decline of -34.36% is steeper than the 3-month -39.69% annualized pace, meaning selling is accelerating rather than stabilizing.
AAON Technical Analysis
AAON is in an unambiguous, sustained downtrend: the stock is down 42.83% over the trailing year, 59.05% over six months, and 27.78% year-to-date, with a maximum drawdown of -63.29% from its peak. At $57.19, the shares sit at roughly 40% of the 52-week range implied by the $141.70 May high and the recent $54.42 low — a positioning that reflects persistent distribution rather than a healthy pullback, and one that historically signals either capitulation or a falling knife until a higher low is established. The stock has lost more than half its value in six months while the S&P 500 gained 9.59% over the same period, a relative strength gap of -52.42 percentage points that confirms this is company-specific de-rating, not market beta.
Short-term momentum is accelerating to the downside rather than stabilizing: the 1-month change of -34.36% is worse than the 3-month change of -39.69% on an annualized basis, meaning the pace of decline has steepened into November, and the 1-month relative strength of -29.37 points versus a -4.99% SPY decline shows the stock is being sold irrespective of tape direction. The most recent sessions capture the violence — a drop from $69.08 on November 3 to $58.25 on November 4 and $54.42 on November 5, followed by a 5.09% bounce to $57.19 on volume of roughly 1.61 million shares. That single-day reversal off the low is the first constructive signal in weeks, but with no RSI reading provided and price still 34% below where it traded a month ago, it reads as a reflex bounce within a downtrend rather than a confirmed reversal; traders would want to see the $54.42 low hold on a closing basis and a reclaim of the $67-70 shelf before treating momentum as repaired.
Key technical levels are now well defined by the recent action: support sits at the $54.42 November 5 low, with a secondary floor near the $58-60 area that broke down on November 4, while resistance is stacked at $67-70 (the late-October consolidation and the November 3 close of $69.08), then $75-80, and ultimately the $141.70 May high that now looks distant. A decisive break below $54.42 would signal that the de-rating is still incomplete and likely opens a test of the $50 psychological level, whereas a reclaim of $70 would be the first evidence of a tradeable bottom. Volatility is elevated — the -63.29% max drawdown and 5%+ single-day moves imply realized volatility far above the market, and while a beta figure is not available in the provided data, the -52.42-point one-year relative strength gap versus SPY makes clear that position sizing must assume high idiosyncratic risk independent of index direction.
Beta
—
—
Max Drawdown
-63.3%
Largest decline past year
52-Week Range
$53-$150
Price range past year
Annual Return
-29.1%
Cumulative gain past year
| Period | AAON Return | S&P 500 |
|---|---|---|
| 1m | -12.9% | -3.7% |
| 3m | -12.0% | -2.9% |
| 6m | -46.4% | +0.2% |
| 1y | -29.1% | +10.1% |
| ytd | -5.3% | +10.0% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
AAON Fundamental Analysis
The revenue trajectory remains positive but is decelerating sharply in growth-rate terms: Q2 2026 revenue of $626.98 million grew 101.23% year-over-year against Q2 2025's $311.57 million, but that comparison flatters the trend because the prior-year base was unusually weak (Q2 2025 net margin was just 4.97%). Sequentially, revenue rose from $424.22 million in Q4 2025 to $496.94 million in Q1 2026 to $626.98 million in Q2 2026, a strong absolute ramp, yet the only segment disclosure provided — Part Sales at $23.8 million — is too small to explain the mix, leaving the implication that the core AAON Oklahoma and BASX equipment lines are carrying growth. The investment case hinges on whether that sequential momentum persists into the back half of 2026; the stock's 59% six-month decline suggests the market has already concluded that the growth rate is peaking.
Profitability is the crux of the bear case. The company is solidly profitable — Q2 2026 net income of $56.66 million on a 9.04% net margin and $68.88 million of operating income (10.99% operating margin) — but gross margin has compressed materially, from 34.88% in Q3 2024 to 27.81% in Q3 2025 to 25.15% in Q1 2026 and 24.32% in Q2 2026, a roughly 1,050-basis-point erosion over seven quarters that points to pricing pressure, unfavorable mix, or cost inflation not being passed through. The current 26.75% gross margin and 10.56% operating margin are below the 30%+ gross margins AAON commanded in 2023-2024 and below what premium HVAC peers typically sustain, so the key question is whether this is a cyclical trough tied to ramping new capacity or a structural reset. EPS of $0.69 in Q2 2026 versus $0.19 a year earlier shows operating leverage still exists on higher volume, but the margin trend must inflect for the earnings recovery implied by consensus to materialize.
Balance-sheet health is adequate but cash generation is the weak link. The current ratio of 2.63 and debt-to-equity of 0.47 are comfortable, and ROE of 12.02% is respectable, but trailing free cash flow is -$118.79 million and the last four quarters show persistent cash burn: -$31.18 million in Q2 2026, -$11.13 million in Q1 2026, -$43.18 million in Q4 2025, and -$33.30 million in Q3 2025, driven by capital expenditures of $52.16 million, $45.13 million, $62.50 million, and $45.55 million respectively. Operating cash flow has been thin and volatile ($20.97 million in Q2 2026, $33.99 million in Q1 2026, $19.32 million in Q4 2025, $12.26 million in Q3 2025), and the company has plugged the gap with financing inflows ($40.29 million in Q2 2026, $17.15 million in Q1 2026) and share issuance, while cash on hand is only $12.73 million. With a payout ratio of 30.30% and a dividend yield of just 0.52%, the dividend is small but not yet at risk; the real risk is that continued capex without a matching FCF inflection forces further external financing at a depressed share price.
Quarterly Revenue
$626976000.0B
2026-06
Revenue YoY Growth
+101.2%
YoY Comparison
Gross Margin
24.3%
Latest Quarter
Free Cash Flow
$-118788000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is AAON Overvalued?
Because AAON is profitable (Q2 2026 net income of $56.66 million), the PE ratio is the appropriate primary metric, and it presents a confusing picture: the trailing PE is 57.77x while the forward PE is reported as -1.59x, a negative figure that is almost certainly a data artifact rather than a genuine negative earnings forecast, since the two covering analysts model average EPS of $4.545 for the forward period. On that consensus EPS, the stock at $57.19 trades at roughly 12.6x forward earnings — a dramatic discount to the 57.77x trailing multiple, and the gap implies the market expects a very large earnings rebound that the current margin trajectory does not yet support. The EV/EBITDA of 29.41x and price-to-sales of 4.31x are more consistent with a premium-quality industrial than with the forward PE, which underscores how much of the valuation now rests on the forward earnings estimate being achieved.
Against the industrial machinery sector, the picture is mixed rather than uniformly cheap: the PS ratio of 4.31x and price-to-book of 6.95x are above typical machinery-sector levels (roughly 1.5-2.5x sales and 2-4x book), while the trailing PE of 57.77x is well above a sector average in the low-20s, a premium of more than 100%. That premium is hard to justify on current fundamentals — a 26.75% gross margin, 10.56% operating margin, and 7.46% net margin are below what a premium multiple normally demands — but it is defensible if the forward EPS of $4.545 is real, which would put the stock at a steep discount to peers on 2027 earnings. The valuation is therefore a binary bet on margin recovery rather than a simple premium/discount call.
Historically, AAON has traded at a wide range of multiples, and the current reading sits near the low end on sales but the high end on earnings. The PS ratio has collapsed from 32.15x in Q4 2024 and 20.17x in Q3 2025 to 4.31x today, while the trailing PE has moved from 98.07x in Q4 2024 to 57.77x now — a de-rating that reflects both the falling share price and the earnings base catching up. The price-to-book of 6.95x is near the low end of its recent 6.8x-11.6x band, and the PEG ratio of -1.59 is not meaningful given the negative sign. The takeaway is that the market has already repriced AAON from a high-growth compounder to a cyclical industrial, and further downside now depends on whether margins stabilize near 24-27% or continue to erode.
PE
57.8x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 24x~63x
vs. Industry Avg
30.2x
Industry PE ~30.2x*
EV/EBITDA
29.4x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the cash-burn profile and margin trajectory. Trailing free cash flow is -$118.79M, with four consecutive negative quarters driven by capex of $52.16M, $45.13M, $62.50M, and $45.55M against operating cash flow of only $20.97M, $33.99M, $19.32M, and $12.26M. Cash on hand is just $12.73M, and the company has plugged the gap with financing inflows of $40.29M in Q2 2026 and $17.15M in Q1 2026 plus share issuance — a pattern that, if capex continues without an FCF inflection, forces further external financing at a depressed share price. Gross margin compression from 34.88% in Q3 2024 to 24.32% in Q2 2026 compounds the risk, since the earnings recovery implied by consensus EPS of $4.545 depends entirely on that trend reversing.
Market and competitive risks are dominated by valuation compression and demand concentration. At EV/EBITDA of 29.41x, PS of 4.31x, and P/B of 6.95x, AAON still trades at a premium to machinery-sector norms of roughly 1.5-2.5x sales and 2-4x book, leaving room for further multiple contraction if margins disappoint. The customer base is skewed toward data centers, schools, healthcare, and industrial process cooling, so any slowdown in hyperscale data-center ordering — the very driver of the recent order momentum — would hit revenue directly; the 59.05% six-month decline and -52.42-point relative strength gap versus SPY show the market is already pricing this risk. With only 2 analysts covering the stock and no published average price target, price discovery is inefficient and headline-driven volatility is amplified, as evidenced by the 5%+ single-day moves in early November.
Worst-case scenario: gross margin fails to stabilize above 24%, Q3/Q4 2026 results miss the $4.545 consensus EPS, and the two bullish analysts downgrade, removing the last fundamental support. In that chain, the stock breaks the $54.42 November 5 low and tests the $50 psychological level, with the -63.29% max drawdown from the $141.70 May high as a guide to how far sentiment-driven selling can run. From the current $57.19, a move to the $54.42 low is roughly -4.8%, but a retest of the $50 level implies about -12.6%, and a full re-rating toward the low end of historical multiples could extend losses toward the -35% to -40% range if forward EPS estimates are cut. Position sizing must assume high idiosyncratic risk independent of index direction.
FAQ
The most severe risk is margin durability: gross margin has compressed roughly 1,050bps over seven quarters from 34.88% in Q3 2024 to 24.32% in Q2 2026, and a break below 24% would invalidate the $4.545 forward EPS consensus that underpins the entire valuation case. Second is the cash-burn profile: trailing FCF is -$118.79M across four consecutive negative quarters, with capex of $52.16M in Q2 2026 against operating cash flow of only $20.97M and cash on hand of just $12.73M, creating a risk of dilutive external financing at a depressed share price. Third is demand concentration in hyperscale data-center ordering, the driver of the recent order momentum, where any pause would hit revenue directly. Fourth is valuation and sentiment risk: at EV/EBITDA of 29.41x and P/B of 6.95x there is room for further multiple compression, and with only 2 analysts and no published price target, price discovery is inefficient — reflected in the -63.29% max drawdown and -52.42-point one-year relative strength gap versus SPY.
The scenario framework assigns a 50% probability to the base case of $60-$72, a 25% probability to the bull case of $85-$95, and a 25% probability to the bear case of $40-$50. The base case assumes gross margin stabilizes in the 24-27% band without a decisive inflection, revenue decelerates from the 101.23% YoY Q2 2026 pace as the weak prior-year base annualizes, and the stock bases above the $54.42 low without reclaiming the $75-80 resistance shelf. The bull case requires gross margin to inflect toward the mid-to-high 20s, validating consensus EPS and re-rating the multiple toward the high-teens to low-20s typical of premium HVAC peers. The bear case assumes gross margin breaks below 24%, results miss the $4.545 consensus, and the two bullish analysts downgrade, breaking $54.42 and testing $50. The base case is most likely, and its key assumption is that the margin trough is cyclical rather than structural.
The answer depends entirely on which earnings base you trust, which is why the valuation looks contradictory. On trailing figures the stock is expensive: PE of 57.77x versus a machinery sector average in the low-20s, EV/EBITDA of 29.41x, PS of 4.31x, and P/B of 6.95x against typical sector levels of 1.5-2.5x sales and 2-4x book. On the $4.545 consensus forward EPS, however, the stock trades at roughly 12.6x — a discount to peers — but that requires a margin recovery the current 26.75% gross margin and 10.56% operating margin do not yet demonstrate. The market has already repriced AAON from a high-growth compounder to a cyclical industrial, with PS collapsing from 32.15x in Q4 2024 to 4.31x today. The verdict is fairly valued on forward earnings but still expensive on trailing and EV/EBITDA metrics — the market is paying for a margin recovery it has not yet seen.
The risk/reward is genuinely two-sided rather than clearly favorable. On the upside, consensus forward EPS of $4.545 puts the stock at roughly 12.6x at $57.19, a steep discount to its 57.77x trailing PE, and both covering analysts remain bullish (Oppenheimer Outperform October 14, 2026; Baird Outperform August 11, 2026) with a tight EPS range of $4.438-$4.661. On the downside, that cheap multiple depends entirely on a gross margin recovery from 24.32% in Q2 2026, while trailing FCF is -$118.79M, cash is only $12.73M, and EV/EBITDA of 29.41x is still premium. The most realistic downside is a retest of the $54.42 November 5 low (-4.8%) or the $50 level (-12.6%), with a full re-rating toward the -35% to -40% range if forward EPS estimates are cut. It is a reasonable buy only for risk-tolerant investors who wait for confirmation — a sequential gross margin increase above 25% and a closing hold of $54.42 — rather than for those seeking a clean bargain today.
AAON is better suited to a patient, risk-tolerant holding period of at least 12-24 months than to short-term trading, because the thesis hinges on a margin inflection that will only be confirmed over several quarterly reports. The stock is in an unambiguous downtrend — down 59.05% over six months, 42.83% over a year, and 27.78% year-to-date, with a -63.29% max drawdown — and the 1-month decline of -34.36% is steeper than the 3-month pace, meaning momentum is still accelerating to the downside and short-term entry timing is treacherous. The 5.09% bounce off the $54.42 low on November 6 is a single session, not a confirmed bottom, so traders would need a closing hold of $54.42 plus a reclaim of the $67-70 shelf before treating momentum as repaired. The 0.52% dividend yield and 30.30% payout ratio offer negligible income support, and with only 2 analysts and no published price target, earnings visibility is limited. A staged entry over several quarters, sized for high idiosyncratic volatility, is more appropriate than a single lump-sum position.