Applied Industrial Technologies is a distributor of industrial products and services that combines conservative balance-sheet metrics with steady cash generation and historically high returns on equity. Financial Performance and Cash Flow The company generates meaningful operating cash flow, with TTM operating cash flow rising from $344.0M (period ending 2023-06-30) to $371.4M (period ending 2024-
Applied Industrial Technologies is a distributor of industrial products and services that combines conservative balance-sheet metrics with steady cash generation and historically high returns on equity.
The company generates meaningful operating cash flow, with TTM operating cash flow rising from $344.0M (period ending 2023-06-30) to $371.4M (period ending 2024-06-30). Trailing-twelve-month net income recently reached $403.8M, after a multi‑year rise from $24.0M in 2020 to a peak of $479.9M in 2024. These trends point to improving cash conversion and scale (Strategic Capital Allocation, Earnings Quality).
Balance-sheet strength is evident in a current ratio of 2.95, interest coverage of 27.8x, and a low debt‑to‑equity of 0.1867. Together, these indicate ample liquidity and low leverage when measured against operating obligations (Strategic Capital Allocation, Return on Equity (ROE)).
Profitability measures have also been elevated, with recent ROE around 21.3% (after a 27.3% peak in 2024) and a stable gross margin near 30.3% (Return on Equity, Profit Margin Trends).
Notable areas of concern include pronounced seasonality and quarter-to-quarter volatility: June periods show outsized revenue (June 2025 revenue $3.49B; June 2024 $3.33B) and large swings in net income (June 2024 net income $294.5M versus September 2025 $100.8M and December 2025 $95.3M), which compresses comparability across quarters (Revenue & Net Income). Margin dynamics also warrant attention—while gross margin is stable at 30.3%, net margin fell from 8.6% to 7.0% between mid‑2024 and the latest quarter. Operating margin has been uneven, with the most recent at 14.6%. The measured ROE growth rate has been negative, at -0.2180, reflecting some moderation from prior peaks (Profit Margin Trends, Return on Equity).
Cash‑flow uses have shifted: investing cash flow worsened to −$95.4M and financing cash flow outflows widened to −$245.6M in the most recent periods (Strategic Capital Allocation).
Key fundamentals to watch moving forward include trends in TTM operating cash flow (currently $371.4M), trailing net income (currently $403.8M), quarterly seasonality around the June period ($3.49B revenue), ROE (most recent 21.3%), and margin trajectories—gross margin (30.3%), operating margin (14.6%), and net margin (7.0%)—alongside the path of financing cash flows (−$245.6M) that will affect liquidity and capital allocation (Revenue & Net Income, Profit Margin Trends, Strategic Capital Allocation).
The foundation of business quality and long-term value creation
APPLIED INDUSTRIAL TECHNOLOGIES INC’s reported figures show a recurring mid-year surge in both revenue and net income, with June-period results markedly larger than other quarters. Notable inflection points are the June 2025 revenue of $3.49B and the June 2024 revenue of $3.33B, which coincide with elevated net income readings (June 2024 net income $294.5M; June 2025 net income $207.6M). Outside those mid-year peaks, quarterly revenues most often sit near $1.06B–$1.20B and net income commonly ranges around $90M–$100M.
In the most recent sequence, net income declined from $207.6M in the June 2025 period to $100.8M in September 2025 and $95.3M in December 2025, while the most recent revenue observation is $1.20B for the September 2025 quarter. The most recent revenue was $1.20B and the most recent net income was $95.3M.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Period Information
Report Type: Annual (10-K)
Period: Oct 2024 to Sep 2025
Analyzing long-term margin stability and competitive positioning
In the most recent quarters, APPLIED INDUSTRIAL TECHNOLOGIES INC's gross margin has been stable at 30.3% (both 2025-06-30 and 2025-09-30). Operating margin increased sharply quarter-over-quarter from 10.9% on 2025-06-30 to 14.6% on 2025-09-30, while net profit margin declined from 8.6% to 7.0% over the same interval.
Looking across the multi-year series, gross margin rose from roughly 28.9–29.0% in 2020–2022 to 30.3% in 2025. Operating margins were generally in the high single digits (7.9–9.4%) through 2022 before moving into the low double digits in 2025. Net margin progressed from 4.5% in 2021-06-30 to 8.6% in mid-2024/2025, then moved down to 7.0% in the latest quarter. The most recent gross margin was 30.3%, the most recent operating margin was 14.6%, and the most recent net profit margin was 7.0%.
Understanding Profit Margins
Between Oct 2024 and Sep 2025, Applied Industrial Technologies Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
APPLIED INDUSTRIAL TECHNOLOGIES INC's trailing twelve‑month net income rose markedly over the multi‑year series, climbing from $24.0M (2020‑06‑30) to a peak of $479.9M at 2024‑12‑31 before declining through 2025 into the low‑to‑mid $400M range. In 2025 the TTM net income moved from $393.0M (2025‑06‑30) to $401.7M (2025‑09‑30) and most recently $403.8M (2025‑12‑31), indicating a partial recovery after the 2024 peak.
Trailing twelve‑month operating cash flow has shown a steadier upward trend where reported, rising from $164.6M (2017‑06‑30) to $344.0M (2023‑06‑30) and $371.4M (2024‑06‑30). In the overlapping periods available, operating cash flow has generally trailed net income (for example, 2024‑06‑30 net income $385.8M vs operating cash flow $371.4M), and the most recent reported values are net income (TTM) $403.8M and operating cash flow (TTM) $371.4M.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
APPLIED INDUSTRIAL TECHNOLOGIES INC's ROE has been elevated in recent quarters, rising to a peak of 27.3% for the period ending 2024-09-30 and remaining high at 26.8% for 2024-12-31 before moderating to 21.3% in both 2025-06-30 and 2025-09-30. The most recent two quarters show a stable ROE at 21.3%, representing a step down from the mid-20s levels recorded the prior year.
Looking further back, ROE fell sharply to 2.9% at 2020-06-30, recovered to mid-teens by 2021-06-30 (15.5%), and moved back above 22% in the 2022 mid-year measurements (22.4% and 23.0%). The most recent return on equity was 21.3% as of 2025-09-30.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
APPLIED INDUSTRIAL TECHNOLOGIES INC’s trailing-twelve-month operating cash flow has been positive and showed an increase in the most recent available operating figures, rising from $344.0M (period ending 2023-06-30) to $371.4M (period ending 2024-06-30), indicating stronger cash generation from operations over that year. Over the same recent intervals, investing cash flow was negative and became a larger outflow, moving from -$60.8M (2023-06-30) to -$95.4M (2024-06-30), reflecting increased cash used in investing activities in that period.
Financing cash flow has trended more negative in the latest quarters, shifting from -$126.9M (2023-06-30) to -$156.5M (2024-06-30) and then to -$245.6M (2025-06-30), representing a sizable increase in net cash outflows from financing in the most recent twelve-month period. The most recent values observed are:
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.