The outlook for AAON, Inc. (AAON) may appear a bit clouded to some observers, as orders reportedly are up, but backlog is declining. However, one bright spot for AAON is that the Canadian dollar has backed-off after a significant run-up, which helps with product that is bid in U.S. dollars but is built in Canada. Because of this phenomenon, AAON could experience a slowing in sales growth while still reporting increasing earnings per share.
Another positive is that bidding activity has improved, which certainly bodes well for AAON for the second half of this year. Management has indicated that the results for Q1-08 will be a record, but is understandably reticent about looking further out at this point. Our latest recommendation is BUY, based on a six-month target price which is 32.4% higher than AAON's current price.
The average P/E for this group (excluding AAON) is 14.4, while AAON's is but 13.0. It does not appear to this writer that the market is appropriately crediting AAON for having the highest operating margin of the group; nor does it seem reasonable to accord AAON a PEG ratio that is less than 1/2 the group's mean PEG ratio. Our target price on AAON shares is just over $26.
Read the full analyst report on AAON.
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