While the S&P 500 is up 34.7% since April 2025, Applied Industrial (currently trading at $252.74 per share) has lagged behind, posting a return of 22.7%. This might have investors contemplating their next move.
Is there a buying opportunity in Applied Industrial, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is Applied Industrial Not Exciting?
We're cautious about Applied Industrial. Here are three reasons there are better opportunities than AIT and a stock we'd rather own.
1. Core Business Falling Behind as Demand Plateaus
In addition to reported revenue, organic revenue is a useful data point for analyzing Engineered Components and Systems companies. This metric gives visibility into Applied Industrial’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Applied Industrial failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Applied Industrial might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Applied Industrial’s revenue to rise by 6.1%. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.
3. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Applied Industrial’s EPS grew at an unimpressive 7% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 1.7% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
Applied Industrial isn’t a terrible business, but it isn’t one of our picks. With its shares trailing the market in recent months, the stock trades at 24× forward P/E (or $252.74 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a top digital advertising platform riding the creator economy.
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