AZZ

We rate AZZ INC (AZZ) as a Hold with a composite score of 62.5/100 at a current price of $134.96. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (82th percentile) and value (77th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (41/100), Medium uncertainty, and Exemplary capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

AZZ INC holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 62.5/100 places it at rank #463 in our full 7,333-stock universe. At $3.2B in market capitalization, AZZ INC is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 4% and favorable momentum (66th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 24% (-18.2pp vs sector) narrow to operating margins of 16% (+14.6pp vs sector) and net margins of 20.0%, yielding a gross-to-net conversion rate of 82%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $134.96, AZZ INC appears undervalued relative to its fundamentals. Our value factor score of 77/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 12.0x (a 46% discount to the sector median of 22.3x), EV/EBITDA of 15.1x (at a premium), P/B of 3.0x, P/S of 2.4x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to AZZ INC. The stock presents a balanced risk profile: risk factors are within normal ranges. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

We identify no major risk factors at this time. The company's stability factor sits at the 82th percentile with quality at the 59th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: above-average stability (82th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate AZZ INC's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 25.4%, best-in-class net margins of 20.0%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — AZZ INC meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 0.70% dividend yield, and the combination of 15.0% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, AZZ INC receives a Hold rating with a composite score of 62.5/100 (rank #463 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), Medium uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 66/100.

Our analysis supports a neutral stance on AZZ INC. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.