Is A. O. Smith Corp. overvalued or undervalued?

As of 30 January 2025, A. O. Smith Corp. has moved from an attractive to a fair valuation grade. The company is currently fairly valued, with a P/E ratio of 22, a Price to Book Value of 6.42, and an EV to EBITDA of 15.25. In comparison to its peers, Watsco, Inc. is considered very expensive with a P/E of 32.52, while Allegion Plc is fairly valued with a P/E of 18.85.
Despite the fair valuation, A. O. Smith has demonstrated strong performance metrics, including a ROCE of 36.67% and a ROE of 28.76%. However, the company's recent stock performance has lagged behind the S&P 500, with a 1-year return of -23.77% compared to the index's 10.26%. Overall, while A. O. Smith is fairly valued, its stock performance suggests some caution for potential investors.