Explore the investment case for Applied Industrial Technologies, Inc. (AIT) in our latest analysis from January 14, 2026. This report scrutinizes AIT's performance, valuation, and competitive standing relative to peers such as W.W. Grainger, distilling our findings into actionable insights inspired by the principles of legendary investors.
The outlook for Applied Industrial Technologies is mixed. The company demonstrates excellent financial health with consistent profitability and low debt. Its extensive network of service centers creates a durable competitive advantage. However, AIT lags industry leaders in its digital platform and private-label offerings. Future growth is expected to be steady but is unlikely to outperform the market. The stock's current valuation appears full, reflecting its strengths already. This suggests a cautious approach for investors considering a new position.
US: NASDAQ
Applied Industrial Technologies, Inc. (AIT) operates as a value-added distributor and solutions provider for industrial motion, fluid power, flow control, and related parts and assemblies. The company's business model is fundamentally about being an indispensable partner to industrial customers, ensuring their machinery and operations run smoothly with minimal downtime. It achieves this through two primary business segments: Service Center-Based Distribution and Engineered Solutions. The Service Center segment acts as a classic MRO (Maintenance, Repair, and Operations) distributor, stocking and delivering a vast portfolio of products like bearings, power transmission components, and industrial supplies through a dense network of local branches. The Engineered Solutions segment provides more specialized, higher-touch services, focusing on the design, assembly, and service of fluid power systems and other engineered components. Together, these segments allow AIT to serve a broad spectrum of industrial end markets, from manufacturing and mining to food processing and energy, by providing both the critical parts and the technical expertise needed to keep industries moving. The company's strategy hinges on technical knowledge, product availability, and proximity to the customer, creating a value proposition that goes beyond simply selling a part.
The largest segment is Service Center-Based Distribution, which generated approximately 3.05B in revenue in the trailing twelve months, accounting for roughly 65% of total sales. This segment is the backbone of AIT's operations, offering a massive catalog of over 6.5 million SKUs, with a heavy emphasis on bearings, power transmission products, lubricants, and safety equipment. The total addressable market for North American MRO distribution is estimated to be over 180 billion, growing at a low single-digit CAGR in line with industrial production. The market is highly fragmented, featuring a few large national players like Grainger, Fastenal, and MSC Industrial, alongside thousands of smaller regional and local distributors. Profit margins in this space are driven by purchasing scale, operational efficiency, and the ability to provide value-added services. Competition is intense, based on price, product availability, delivery speed, and technical support. Compared to its primary competitors, AIT differentiates itself with a deep specialization in bearings and power transmission, areas requiring significant technical expertise. While Grainger has a broader general MRO offering and a superior e-commerce platform, and Fastenal excels with its on-site vending and VMI solutions, AIT carves out its niche by being the go-to expert for complex motion control components. The primary consumers are maintenance managers and procurement officers at industrial facilities across thousands of end markets. They rely on AIT for both planned maintenance and, critically, for emergency replacements to avoid costly downtime. This need for immediate availability and correct part specification creates significant customer stickiness, as the cost of a failed bearing far exceeds the cost of the part itself. The moat for this segment is built on its physical network density, which enables rapid local fulfillment, and the accumulated technical expertise of its sales force, which creates high switching costs for customers who depend on that specialized advice.
The Engineered Solutions segment, while smaller with 1.62B in TTM revenue (about 35% of total), is a key differentiator and a source of a deeper competitive moat. This division focuses on fluid power products and systems—hydraulics and pneumatics—which are critical for automating and controlling industrial machinery. It operates more like a specialized engineering firm than a traditional distributor, offering system design, fabrication, and repair services. The addressable market for fluid power distribution and services in North America is approximately 35 billion, growing slightly faster than general MRO due to increasing factory automation. Operating margins in this segment are comparable to the distribution business, around 12.9%, reflecting a mix of product sales and higher-value service revenue. Competition comes from other specialized fluid power distributors like SunSource and Parker Hannifin's own distribution network, as well as smaller, local engineering shops. AIT's scale gives it an advantage in terms of supplier relationships with top brands like Parker and Eaton, as well as a broader service footprint. The customers for Engineered Solutions are often Original Equipment Manufacturers (OEMs) who need custom fluid power assemblies for their machines, and large industrial end-users requiring system upgrades or complex repairs. Customer stickiness is extremely high. Once AIT designs a hydraulic system for an OEM's product line or a specific process in a factory, the costs and operational risks of switching to another provider for service and replacement parts are substantial. This deep integration into a customer's core operations and engineering processes is the segment's primary moat. It is a knowledge-based advantage, reinforced by scale, that is difficult for smaller or less specialized competitors to replicate.
In conclusion, Applied Industrial Technologies possesses a durable, albeit narrow, economic moat rooted in its specialized expertise and extensive physical distribution network. The company's strength lies in being a critical partner for customers with complex needs in power transmission and fluid power. The high switching costs associated with its technical advice and engineered solutions create a loyal customer base and predictable revenue streams. The resilience of the business is further enhanced by the non-discretionary nature of MRO demand; customers must replace worn-out parts to keep their facilities running, regardless of the economic climate. This creates a stable foundation for the business.
However, the durability of this moat faces modern challenges. The competitive landscape in industrial distribution is increasingly being defined by digital capabilities and supply chain efficiency. Industry leaders like Grainger and Amazon Business are leveraging sophisticated e-commerce platforms and data analytics to serve customers more efficiently, particularly for less technical, more commoditized products. While AIT's technical focus provides some insulation, it is not immune to these trends. The company's slower adoption of digital tools and a less prominent private-label strategy compared to peers represent potential long-term risks. To maintain its competitive edge, AIT must continue to deepen its technical expertise while simultaneously investing to modernize its sales channels and enhance its margin profile. The company's business model is solid and has proven resilient, but it operates in a dynamic industry where standing still means falling behind.
Applied Industrial Technologies presents a clean bill of financial health. The company is solidly profitable, reporting a trailing twelve-month net income of $401.73 million on revenue of $4.66 billion. More critically, it generates substantial real cash, with annual free cash flow (FCF) of $465.2 million comfortably exceeding its net income, a sign of high-quality earnings. The balance sheet is a source of strength, featuring cash and equivalents of $418.72 million against total debt of $572.3 million as of the most recent quarter. With a low debt-to-equity ratio of 0.3 and a current ratio of 3.55, liquidity is ample and leverage is not a concern. There are no signs of near-term stress; in fact, debt levels decreased in the latest quarter while cash flow remained strong.
The company's income statement reflects stability and discipline. For the fiscal year ending June 2025, AIT generated revenue of $4.56 billion, with recent quarters showing revenues of $1.23 billion and $1.2 billion, indicating a steady demand environment. The key highlight is the consistency of its margins. The gross margin has held steady around 30% (30.31% annually), and the operating margin has remained in a tight range around 11% (10.96% annually and 10.76% in the latest quarter). For investors, this signals that AIT has significant pricing power and strong cost controls, allowing it to protect profitability even in a slow-growth environment. This margin stability is a crucial strength for a distribution business.
A key test for any company is whether its reported profits are backed by actual cash, and AIT passes this with flying colors. Annually, cash flow from operations (CFO) was $492.39 million, significantly higher than the reported net income of $392.99 million. This indicates excellent management of working capital and confirms the high quality of its earnings. Free cash flow, the cash left after funding operations and capital expenditures, was also very strong at $465.2 million for the year. The balance sheet shows that working capital components like inventory ($521.68 million) and receivables ($765.73 million) are being managed effectively, without trapping excessive cash.
The balance sheet offers a picture of resilience and safety. As of the latest quarter, AIT had a very strong liquidity position with a current ratio of 3.55, meaning its current assets cover short-term liabilities by more than three and a half times. Leverage is low, with total debt of $572.3 million easily managed by the company's cash generation capabilities. The debt-to-equity ratio is a conservative 0.3. Given that annual operating income was nearly $500 million, the company can comfortably service its debt obligations. Overall, the balance sheet is decidedly safe and provides a solid foundation for the company to navigate economic cycles and fund its strategic initiatives.
AIT's cash flow engine is dependable and self-funding. The company consistently generates strong cash flow from its core operations, which in the last two quarters were $147.05 million and $119.32 million, respectively. Capital expenditures are relatively low, running at just $27.19 million for the entire fiscal year, suggesting that the business is not capital-intensive. This leaves substantial free cash flow, which the company deploys to create shareholder value. In the last fiscal year, AIT used its $465.2 million in FCF to pay dividends ($63.7 million), repurchase shares ($167.68 million), and fund acquisitions ($293.41 million), demonstrating a balanced approach to capital allocation.
The company is committed to returning capital to shareholders, and its actions are backed by sustainable financials. AIT pays a regular quarterly dividend, which is easily affordable with a low payout ratio of just 17.71% of earnings. The annual dividend payment of $63.7 million is covered more than seven times over by the company's annual free cash flow, signaling a very high degree of safety. In addition to dividends, AIT actively repurchases its own stock, which has reduced the number of shares outstanding by 1.73% in the most recent quarter. This action helps boost earnings per share and demonstrates management's confidence in the company's value. These shareholder payouts are funded sustainably through internally generated cash, not by taking on new debt.
In summary, AIT's financial foundation is built on several key strengths. The first is its superior cash generation, with annual free cash flow ($465.2 million) consistently exceeding net income. The second is its fortress-like balance sheet, characterized by low debt (0.3 debt-to-equity) and high liquidity (3.55 current ratio). Finally, its stable and healthy margins (~11% operating margin) point to a disciplined operation. The primary risk is not a financial red flag but rather the company's modest top-line growth, which was just 1.88% in the last fiscal year, and its general exposure to the cyclicality of the industrial economy. Overall, the financial foundation looks very stable, providing a secure platform for investors.
A look at Applied Industrial Technologies' performance over different time horizons reveals a story of strong post-pandemic recovery followed by a recent slowdown. Over the five fiscal years from 2021 to 2025, the company achieved an impressive compound annual growth rate (CAGR) in revenue of approximately 8.9% and an even more remarkable EPS CAGR of 28.8%. This highlights a period of significant expansion and profitability improvement. However, this momentum has moderated recently. Over the last three fiscal years, the revenue CAGR slowed to just 1.7%, with the EPS CAGR also decelerating to 6.9%. This shift indicates that while the business executed exceptionally well during the industrial upcycle, it has now entered a more mature, slower-growth phase that is more in line with the broader industrial economy.
The most compelling aspect of this performance is the consistent improvement in profitability, even as revenue growth tapered. The company's ability to drive margin expansion has been the central theme of its success. Operating margin, a key indicator of core profitability, steadily climbed from 7.87% in fiscal 2021 to a strong 10.96% by fiscal 2025. This was not a one-time event but a consistent trend, showing the company's ability to manage pricing, control costs, and benefit from operating leverage. This disciplined approach allowed net income to more than double from $144.76 million to $392.99 million over the five-year period, a testament to high-quality earnings growth that was not solely dependent on a booming top line.
From a financial stability perspective, the company's balance sheet has become significantly stronger and less risky. Management prioritized paying down debt, reducing total debt from $920 million in FY2021 to $771 million in FY2025. This, combined with strong earnings (EBITDA) growth, resulted in a dramatic improvement in the company's leverage profile. The debt-to-EBITDA ratio was more than halved, falling from a moderate 2.62x to a very healthy 1.24x. This de-leveraging provides the company with greater financial flexibility to navigate economic uncertainty, pursue acquisitions, or increase shareholder returns. Liquidity also remains robust, with the current ratio improving from 2.8 to 3.32, indicating a strong ability to cover short-term obligations.
The company has consistently demonstrated an ability to convert its profits into cash. Operating cash flow has been positive every year, and after a dip in FY2022 due to investments in inventory to support high growth, it has since rebounded to a record $492.39 million in FY2025. Similarly, free cash flow has been reliably positive, providing the resources for debt reduction, dividends, and share buybacks. Importantly, free cash flow has generally tracked or exceeded net income, particularly in FY2021 and FY2025, which signals that the reported earnings are of high quality and backed by actual cash generation. Capital expenditures have remained modest and disciplined, which is typical for a distribution business and helps maximize free cash flow.
Applied Industrial Technologies has maintained a consistent and shareholder-friendly capital return policy. The company has reliably paid a quarterly dividend and has increased it every year over the past five years. On a per-share basis, the annual dividend has grown steadily from $1.30 in fiscal 2021 to $1.66 in fiscal 2025, reflecting management's confidence in the company's cash-generating ability. In addition to dividends, the company has also been active in managing its share count through repurchases. The total number of shares outstanding has been reduced slightly from 39 million to 38 million over the five-year period, with notable buybacks of $89.66 million in FY2024 and $167.68 million in FY2025.
These capital allocation decisions have directly benefited shareholders. The combination of a slightly declining share count and soaring net income has resulted in powerful EPS growth, which nearly tripled over five years. This shows that the company's growth created substantial value on a per-share basis. The dividend policy is highly sustainable and conservative. The payout ratio, or the portion of earnings paid out as dividends, has remained very low, typically between 15% and 20% in recent years. Furthermore, free cash flow provides overwhelming coverage for the dividend; in FY2025, the company generated $465.2 million in free cash flow and paid out just $63.7 million in dividends. This conservative approach leaves ample cash for reinvestment, acquisitions, and debt management, suggesting a prudent and well-balanced capital allocation strategy.
In conclusion, Applied Industrial Technologies' historical record strongly supports confidence in the company's execution and resilience. The performance has been steady and impressive, particularly in its ability to translate sales into higher profits and cash flow. The single biggest historical strength has been its consistent margin expansion and the disciplined strengthening of its balance sheet through debt reduction. The most notable weakness is the recent and sharp deceleration in revenue growth, which suggests the company is sensitive to the broader industrial economic cycle. Nonetheless, its proven ability to manage profitability and finances through different phases of this cycle is a significant historical accomplishment.
The North American market for Maintenance, Repair, and Operations (MRO) distribution, estimated at over $180 billion, is mature and projected to grow at a modest 2-3% annually, largely in line with industrial production. However, several key shifts are expected to create pockets of higher growth over the next 3-5 years. The most significant is the reshoring and onshoring of manufacturing in the U.S., spurred by government incentives like the CHIPS Act and Inflation Reduction Act, which are expected to drive billions in new factory construction and capital investment. This trend directly benefits distributors like AIT who supply the components needed to build, automate, and maintain these new facilities. Another major driver is the accelerating adoption of automation and robotics in response to labor shortages and the need for higher efficiency. This increases the complexity of machinery, favoring distributors with deep technical expertise in areas like fluid power and motion control.
Despite these tailwinds, the competitive landscape is intensifying. The industry is fragmenting into two primary models: high-touch, technical solution providers and high-volume, digital-first generalists. AIT firmly sits in the former camp, but the latter, led by giants like Grainger and Amazon Business, is making it harder to compete on less-technical products. Barriers to entry for general MRO distribution are falling due to the efficiency of e-commerce, while barriers for specialized, engineered solutions remain high due to the required technical knowledge and service infrastructure. Future demand catalysts include the modernization of the aging U.S. industrial asset base and a growing focus on predictive maintenance, which requires more sophisticated components and monitoring systems. Distributors who can effectively blend technical advice with a seamless digital procurement experience will be best positioned to win share.
One of AIT's core product categories is Bearings and Power Transmission components, which are fundamental to nearly all industrial machinery. Current consumption is driven by non-discretionary replacement cycles in a vast installed base of equipment across manufacturing, mining, and aggregate industries. Consumption is often constrained by customer maintenance budgets and the cyclical nature of industrial activity. Over the next 3-5 years, consumption of standard components will likely grow modestly, but demand for higher-performance, precision components is set to increase significantly. This will be driven by the adoption of robotics and high-speed automated equipment, which require more durable and technologically advanced parts. The U.S. bearings market alone is estimated to be over $10 billion. Catalysts for accelerated growth include increased utilization of industrial capacity and any government-led infrastructure spending. In this segment, customers choose suppliers based on technical expertise, product availability for emergency repairs, and brand reputation. AIT excels here and consistently outperforms generalists like Grainger or Amazon Business, who lack the specialized knowledge to assist with application-specific challenges. A major risk for AIT is a severe industrial recession, which would lead customers to delay preventative maintenance and stretch the life of existing parts, directly impacting sales volumes. The probability of a moderate cyclical downturn in the next 3-5 years is medium.
Another key area is AIT's Engineered Solutions segment, primarily focused on fluid power systems (hydraulics and pneumatics). This segment is a key growth driver, with the North American fluid power market sized at approximately $35 billion. Current consumption is tied to OEM production schedules and capital expenditure projects by end-users. A key constraint is the long sales and design cycle for custom systems. Looking ahead, consumption is expected to grow faster than the general MRO market, driven by the push for factory automation. Industrial customers are increasingly investing in automated systems to improve productivity, and fluid power is a core enabling technology. Growth will be particularly strong in verticals like food and beverage, life sciences, and logistics/warehousing. Customers in this space select partners based on engineering capability, system design expertise, and post-sale support. AIT competes effectively against other specialists like SunSource and the direct sales channels of manufacturers like Parker Hannifin, winning business through its scale, broad service network, and ability to integrate fluid power systems with other industrial components. A significant risk is the segment's sensitivity to the economic cycle; a downturn could cause customers to freeze capital spending, leading to the delay or cancellation of large-scale projects. Given current economic uncertainty, the probability of this risk materializing is medium to high.
AIT's Value-Added Services, including Vendor-Managed Inventory (VMI) and on-site solutions, are crucial for customer retention. Currently, these services are primarily used by AIT's largest strategic accounts, who seek to outsource their MRO storeroom management to reduce costs and improve efficiency. The primary constraint is the high cost-to-serve for AIT and the intense competition from Fastenal, which has built a dominant position in industrial vending and on-site services. Over the next 3-5 years, consumption will likely shift from basic inventory replenishment to more deeply integrated on-site partnerships that include technical support and storeroom analytics. The catalyst is the growing desire among large industrial companies to consolidate their supplier base and partner with distributors who can provide a comprehensive service offering. While AIT is not the market leader, its ability to pair VMI with its technical expertise in fluid power and bearings gives it a defensible niche. However, a key risk is that AIT's technology and scale in this area may not be competitive enough to win against Fastenal's highly efficient model, potentially forcing AIT to accept lower margins to keep accounts. The probability of this margin pressure is high.
Finally, Digital Commerce represents a strategic necessity for AIT's future growth. Currently, its e-commerce platform, EDI, and punchout capabilities are used for routine re-orders from existing customers but are not a primary driver for new customer acquisition. Consumption is limited by a user experience that lags behind best-in-class competitors like Grainger. For AIT to lower its cost-to-serve and defend its business in more commoditized product lines, digital sales penetration must increase. The expected shift will be a migration of routine, phone-and-fax-based orders to the online platform, freeing up salespeople to focus on high-value technical sales. The number of companies in the MRO space will likely consolidate as smaller players without the capital to invest in a robust digital and supply chain infrastructure are acquired or lose share. The most significant risk for AIT is underinvestment in its digital capabilities. A failure to create a seamless, user-friendly online experience could lead to the loss of wallet share on standard MRO products to Amazon Business and other digital-first players. The probability of AIT continuing to lag peers in digital is high, making this a persistent strategic vulnerability.
As of January 12, 2026, with a share price of $273.70 and a market capitalization of approximately $10.47 billion, Applied Industrial Technologies is trading firmly in the upper portion of its 52-week range. This positioning reflects strong investor sentiment and recent positive momentum. Key valuation metrics include a trailing P/E ratio of 26.7x and an enterprise value to TTM EBITDA multiple of 18.2x. While these multiples appear high, AIT's robust financial health, characterized by a strong balance sheet, consistent operating margins around 11%, and free cash flow that exceeds net income, provides a solid foundation for a premium valuation.
A consensus of valuation methods suggests the stock is currently trading near its intrinsic worth. Wall Street analysts provide a narrow 12-month price target range of $290 to $305, with a median of $297.50, implying modest single-digit upside. This view is corroborated by a discounted cash flow (DCF) analysis, which, based on reasonable assumptions of 6.0% short-term FCF growth and a 9.0% discount rate, yields a fair value estimate between $255 and $295. Furthermore, the company's strong free cash flow yield of approximately 4.4% supports a valuation range of $246 to $307 per share, reinforcing the conclusion that the current price is well-supported by the company's cash-generating capabilities.
A historical and peer-based multiple analysis adds important context, revealing that AIT is expensive relative to its own past but justifiably so against competitors. The current P/E ratio of 26.7x is significantly above its five-year average of approximately 19.9x, a premium that reflects fundamental business improvements like expanded operating margins and higher returns on equity. When compared to direct peer MSC Industrial (EV/EBITDA of ~13.5x), AIT's multiple of ~18.2x is substantially higher. This premium is warranted by AIT's superior profitability, more stable margins, and better execution, which the market clearly rewards.
Triangulating these different valuation signals—analyst targets, intrinsic cash flow value, and yield-based metrics—points to a final fair value range of $260 to $300, with a midpoint of $280. With the current stock price of $273.70 sitting squarely within this range, the final verdict is that Applied Industrial Technologies is fairly valued. While it is a high-quality operator, the current price offers little margin of safety, suggesting that the market has already priced in its strong operational performance and future growth prospects.
In 2025, Bill Ackman would likely view Applied Industrial Technologies as a solid, well-managed company but not a compelling investment opportunity for his strategy. He would appreciate its consistent profitability, demonstrated by a respectable Return on Invested Capital (ROIC) of around 15%, and its prudent financial management, reflected in a conservative net debt to EBITDA ratio of ~1.5x. However, AIT lacks the dominant, high-return characteristics of a company like Fastenal or the massive scale of Grainger, making it a good business rather than a great one in his eyes. More importantly, AIT does not present the clear catalyst for value creation that Ackman typically seeks, as it is neither a significantly undervalued asset nor an underperforming business in need of an operational turnaround. For retail investors, the takeaway is that while AIT is a quality industrial company, it lacks the specific activist angle or deep undervaluation that would attract a high-conviction investor like Ackman at its current valuation of over 20x earnings. Ackman's decision could change if AIT were to engage in a transformative acquisition creating clear value, or if its stock price were to drop by 25-30%, making its free cash flow yield significantly more attractive.
Warren Buffett would view Applied Industrial Technologies as a solid, understandable, and necessary business, akin to the 'picks and shovels' of the industrial economy. He would be attracted to its durable, if not impenetrable, moat built on technical expertise and customer switching costs, which is reflected in its consistent Return on Invested Capital (ROIC) of around 15%. Furthermore, the company's conservative balance sheet, with a net debt to EBITDA ratio of approximately 1.5x, aligns perfectly with his preference for financial prudence. However, with the stock trading at a Price-to-Earnings (P/E) ratio of ~21x in 2025, Buffett would likely conclude that there is an insufficient 'margin of safety' at the current price. For retail investors, the takeaway is that AIT is a high-quality business, but patience would be key, as Buffett would almost certainly wait for a more attractive valuation before investing. Buffett would likely favor Genuine Parts Company (GPC) for its similar quality industrial business (Motion Industries), superior dividend history, and more reasonable valuation at a ~16x P/E. He would also admire W.W. Grainger (GWW) for its dominant scale and higher ~30% ROIC, and Fastenal (FAST) for its exceptional ~35%+ ROIC and moat, though he would find the valuations of both GWW (~23x P/E) and FAST (~33x P/E) too rich. A significant market downturn that brings AIT's P/E ratio into the mid-teens would likely change Buffett's cautious stance to a buying opportunity.
Charlie Munger would view Applied Industrial Technologies as a fundamentally sound and understandable business, a key first step in his process. He would appreciate its focus on technical, value-added distribution, which creates a decent competitive moat and allows for a respectable Return on Invested Capital (ROIC) of around 15%. This figure, which measures how well a company generates cash flow relative to the capital it has invested, is comfortably above the typical cost of capital, indicating genuine value creation. However, Munger would quickly note that while AIT is good, it is not the best-in-class, as peers like Fastenal and Grainger boast ROICs exceeding 30%, demonstrating superior business models and moats. Given AIT's current Price-to-Earnings (P/E) ratio of ~21x, Munger would conclude it's a fair price for a good business, not the fair price for a great business he seeks. Therefore, he would likely admire the company from the sidelines, choosing to wait for a more attractive price or invest in a higher-quality competitor. If forced to choose the best stocks in this sector, Munger would likely favor Fastenal for its unparalleled moat and ~35% ROIC, Grainger for its dominant scale and ~30% ROIC, and perhaps Genuine Parts Company for its combination of quality and a more reasonable valuation (~16x P/E). A decision to invest in AIT would require a significant market downturn, creating a substantial margin of safety by lowering its P/E ratio into the mid-teens.
Applied Industrial Technologies operates in the highly fragmented and competitive industrial distribution industry. This sector is crucial for the economy, acting as the circulatory system for manufacturing and maintenance by supplying essential parts like bearings, power transmission components, and hydraulic systems. Success in this industry hinges on scale, logistical efficiency, product availability, and technical expertise. AIT has carved out a strong niche by focusing on value-added services and technical sales, differentiating itself from competitors who might compete solely on price or breadth of catalog.
The competitive landscape is dominated by a few large players and thousands of smaller, regional distributors. AIT sits in an interesting middle ground; it is a national player with significant scale (~$4.4 billion in annual revenue) but is dwarfed by multi-national behemoths like W.W. Grainger, Fastenal, and Ferguson. This positioning presents both opportunities and challenges. AIT can be more agile than its largest rivals and provide a higher-touch service model. However, it lacks the immense purchasing power, logistical networks, and R&D budgets of the industry leaders, which can put pressure on its margins and ability to invest in next-generation technologies like advanced e-commerce and AI-driven inventory management.
From an investment perspective, AIT's strategy revolves around disciplined execution and strategic acquisitions. The company has a history of successfully integrating smaller distributors to expand its geographic footprint and technical capabilities. This approach fuels steady, incremental growth. While it may not offer the explosive growth potential of a market disruptor, its focus on critical, non-discretionary MRO products provides a resilient revenue stream that can weather economic downturns better than companies focused on new capital equipment. The primary challenge for AIT will be to maintain its service-based differentiation while competing on efficiency and price against larger, more technologically advanced competitors.
W.W. Grainger is an industry titan that operates on a much larger scale than Applied Industrial Technologies. With a vast product catalog and a highly sophisticated e-commerce platform, Grainger targets a wide range of customers through both its high-touch, service-intensive model and its endless assortment online model. This dual approach allows it to capture a larger share of the market than AIT, which is more focused on its traditional service-center network and specialized expertise. Grainger's scale provides significant advantages in purchasing, logistics, and technology investment, creating a formidable competitive barrier. While AIT competes effectively in its niche areas, it is fundamentally outmatched in terms of size, brand recognition, and operational leverage, making it more of a follower than a leader when compared directly to Grainger.
In terms of business moat, Grainger's primary advantage is its immense scale and brand equity. With revenue nearly four times that of AIT (~$16.6B vs. ~$4.4B), Grainger benefits from superior economies of scale, allowing it to negotiate better terms with suppliers. Its brand is synonymous with MRO supply for many large businesses, creating a powerful competitive advantage. AIT's moat is built more on switching costs related to its deep technical integration with customers, particularly in its specialized service centers. However, Grainger's network of over 300 branches in North America and a leading e-commerce platform provides a broader reach. Regulatory barriers are low for both, but Grainger's operational scale is a much higher barrier to entry. Winner: W.W. Grainger, Inc. due to its dominant scale and powerful brand recognition.
Financially, Grainger is a stronger performer. It consistently generates higher margins, with an operating margin of around 16% compared to AIT's 11.5%. This difference highlights Grainger's superior pricing power and efficiency. In terms of profitability, Grainger's Return on Invested Capital (ROIC) typically exceeds 30%, significantly higher than AIT's ~15%, indicating more effective use of its capital. Both companies maintain healthy balance sheets; Grainger's net debt to EBITDA ratio is slightly lower at ~1.3x versus AIT's ~1.5x, showing a strong ability to manage its debt. Grainger's free cash flow generation is also substantially larger in absolute terms, providing more flexibility for shareholder returns and investment. Winner: W.W. Grainger, Inc. based on its superior profitability and efficiency metrics.
Looking at past performance, Grainger has demonstrated more robust growth and shareholder returns. Over the past five years, Grainger has grown its revenue at a higher compound annual growth rate (CAGR) and has seen more significant margin expansion. Its total shareholder return (TSR) has also outpaced AIT's over 1, 3, and 5-year periods, reflecting the market's confidence in its business model and execution. While AIT has delivered consistent, positive returns, its performance has been less dynamic. From a risk perspective, both stocks exhibit similar volatility (beta), but Grainger's superior scale and market leadership arguably make it a lower-risk investment over the long term. Winner: W.W. Grainger, Inc. for delivering stronger growth and superior shareholder returns historically.
The future growth outlook appears brighter for Grainger. Its significant investments in its e-commerce platform and data analytics are key drivers that AIT cannot match at the same scale. Grainger is better positioned to capture the ongoing shift of B2B purchasing online. Furthermore, its 'endless assortment' model through Zoro and MonotaRO provides access to a much larger total addressable market (TAM). AIT's growth will likely continue to come from incremental market share gains in its niche segments and bolt-on acquisitions, which is a solid but less scalable strategy. Consensus estimates generally forecast higher long-term earnings growth for Grainger. Winner: W.W. Grainger, Inc. due to its multiple levers for future growth, especially in digital channels.
From a valuation perspective, Grainger typically trades at a premium to AIT, which is justified by its superior financial profile. Grainger's Price-to-Earnings (P/E) ratio is around 23x, while AIT's is slightly lower at ~21x. On an EV/EBITDA basis, Grainger also commands a higher multiple. This premium reflects its higher margins, stronger growth prospects, and market leadership position. While AIT may appear cheaper on a relative basis, the price difference does not fully account for the quality gap. An investor is paying more for Grainger, but they are getting a higher-quality business with better long-term prospects. For a value-focused investor, AIT might be appealing, but for a quality-at-a-reasonable-price investor, Grainger holds its own. Winner: Applied Industrial Technologies, Inc., but only for investors strictly seeking a lower relative valuation, as Grainger's premium is well-earned.
Winner: W.W. Grainger, Inc. over Applied Industrial Technologies, Inc. Grainger's victory is decisive, rooted in its overwhelming scale, superior profitability, and stronger growth levers. Its operating margin of 16% is significantly higher than AIT's 11.5%, demonstrating superior efficiency and pricing power. While AIT is a well-run company with a respectable niche in technical services, it cannot compete with Grainger's massive logistical network, brand dominance, and advanced digital capabilities. The primary risk for Grainger is its size, which could lead to slower growth, but its continued investment in high-growth online channels mitigates this. AIT's main weakness is its 'in-between' market position—not big enough to dominate on scale, not small enough to be a pure niche specialist. This makes Grainger the clear choice for an investor seeking the industry leader.
Fastenal Company competes with Applied Industrial Technologies by focusing on a different service model: bringing inventory directly to the customer's location through its vast network of branches and industrial vending machines. While AIT focuses on technical expertise and a broad catalog of engineered products, Fastenal excels at high-velocity, small-ticket items like fasteners and safety supplies. Fastenal's 'Onsite' model, where it manages inventory within a customer's facility, creates extremely high switching costs and deep integration. This strategy has resulted in industry-leading operating margins and a highly resilient business model. AIT is more of a traditional distributor, whereas Fastenal is a logistics and supply chain service company disguised as a distributor, giving it a distinct competitive edge in its target markets.
Fastenal's business moat is arguably one of the strongest in the industry, built on switching costs and scale. Its network of over 50,000 active vending machines and 1,800+ Onsite locations creates a dependency that is very difficult for competitors like AIT to break. Once a customer adopts Fastenal's inventory management system, the cost and disruption of switching are substantial. AIT's moat relies on the technical knowledge of its salesforce, which is valuable but less sticky than Fastenal's embedded solutions. In terms of scale, Fastenal's revenue of ~$7.4B is significantly larger than AIT's ~$4.4B, and its physical footprint of over 3,300 locations provides an unparalleled last-mile service capability. Winner: Fastenal Company due to its exceptionally strong moat built on high switching costs.
From a financial standpoint, Fastenal is a model of efficiency. Its operating margin consistently hovers around 20%, which is among the best in the distribution industry and far superior to AIT's ~11.5%. This reflects the efficiency of its vending and Onsite models. Fastenal's balance sheet is pristine, with a net debt to EBITDA ratio of just ~0.3x, compared to AIT's more moderate ~1.5x. This low leverage gives Fastenal tremendous financial flexibility. Profitability is also top-tier, with an ROIC that often exceeds 35%, dwarfing AIT's ~15%. While AIT is financially sound, it cannot match Fastenal's combination of high margins, low leverage, and exceptional returns on capital. Winner: Fastenal Company for its world-class financial performance.
Historically, Fastenal has been a superior growth engine. Over the last decade, Fastenal has consistently grown revenues and earnings at a faster pace than AIT, driven by the rapid adoption of its Onsite and vending solutions. Its 5-year revenue CAGR has been in the high single digits, generally outpacing AIT. This consistent growth has translated into exceptional long-term shareholder returns, with Fastenal's TSR significantly outperforming AIT over most multi-year periods. In terms of risk, Fastenal's business is highly correlated with industrial production, but its sticky customer relationships provide a resilient base of demand, making its earnings stream very predictable. Winner: Fastenal Company for its long track record of superior growth and shareholder wealth creation.
Looking ahead, Fastenal's growth strategy remains clear and effective: continue to sign up new Onsite locations and expand its network of vending devices. This strategy has a long runway for growth, as the company still has a small share of its potential customers' total MRO spend. AIT's growth is more tied to the broader industrial economy and its ability to make accretive acquisitions. While this is a viable strategy, it is less predictable and scalable than Fastenal's organic, customer-driven growth model. Analysts project Fastenal will continue to grow its earnings at a faster rate than AIT over the next several years. Winner: Fastenal Company due to its proven, repeatable, and scalable growth formula.
Fastenal's superior quality commands a premium valuation, and it is consistently one of the most expensive stocks in the industrial sector. Its P/E ratio is often above 30x, significantly higher than AIT's ~21x. This high valuation reflects the market's appreciation for its strong moat, high margins, and consistent growth. For an investor, this presents a classic dilemma: AIT is undeniably the cheaper stock, but Fastenal is the higher-quality company. The risk with Fastenal is that any slowdown in growth could cause its high multiple to contract sharply. AIT offers a higher margin of safety from a valuation standpoint. Winner: Applied Industrial Technologies, Inc. as it offers a much more reasonable entry point for value-conscious investors.
Winner: Fastenal Company over Applied Industrial Technologies, Inc. Fastenal is a superior business due to its incredibly strong competitive moat, industry-leading profitability, and consistent growth model. Its operating margin of ~20% is nearly double that of AIT, and its ROIC of 35%+ demonstrates exceptional capital allocation. AIT is a solid company, but its business model is more conventional and less defensible than Fastenal's Onsite and vending strategy, which creates deep customer entrenchment. The primary weakness for Fastenal is its perpetually high valuation (~33x P/E), which leaves little room for error. However, the sheer quality of the business and its track record of execution justify its premium and make it the long-term winner.
MSC Industrial Direct is a very close competitor to Applied Industrial Technologies, with a similar market capitalization and revenue base. Both companies serve the industrial MRO market, but with different areas of emphasis. MSC has a strong heritage in serving the metalworking industry, providing cutting tools, abrasives, and other supplies to machine shops and manufacturers. AIT, by contrast, has deeper expertise in bearings, power transmission, and fluid power products. MSC has invested heavily in e-commerce and a massive catalog of over 2 million SKUs, positioning itself as a one-stop shop. AIT's approach is more focused on providing technical solutions through its service centers. The two represent different philosophies: MSC's breadth of product versus AIT's depth of expertise.
Both companies possess moats built on customer relationships and logistical competence, but they are not as formidable as those of larger peers. MSC's moat comes from its extensive product catalog (2 million+ SKUs) and its next-day delivery promise, which creates value for customers needing rapid fulfillment. AIT's moat is its technical sales force and service capabilities, which create switching costs for customers who rely on that expertise. In terms of scale, the two are very similar, with MSC's revenue at ~$3.9B and AIT's at ~$4.4B. Neither has the scale advantage of a Grainger or Fastenal. Regulatory barriers are nonexistent for both. Overall, their moats are comparable in strength but different in nature. Winner: Tie, as both have defensible but not dominant positions in their respective areas of focus.
From a financial perspective, AIT currently has a slight edge. AIT's operating margin of ~11.5% is healthier than MSC's, which has recently been closer to 10.5%. This indicates AIT has been more successful at managing pricing and costs in the current environment. AIT also generates a stronger Return on Invested Capital (~15% vs. MSC's ~12%), suggesting more efficient use of its assets. Both companies have similar leverage profiles, with net debt to EBITDA ratios around 1.5x-1.6x. While MSC has struggled with margin pressure, AIT has shown more resilience. AIT's free cash flow conversion has also been slightly more consistent. Winner: Applied Industrial Technologies, Inc. due to its superior margins and returns on capital.
Historically, both companies have had periods of strong performance, but AIT has shown more consistency in recent years. Over the past five years, AIT has managed to grow its EPS at a more stable rate and has seen better margin performance compared to MSC, which has faced significant gross margin headwinds. In terms of shareholder returns, AIT's stock has outperformed MSC's significantly over the last 1, 3, and 5-year periods. MSC's stock has been largely range-bound, reflecting the market's concerns about its ability to protect margins in a competitive environment. AIT's execution has simply been better, leading to superior results for investors. Winner: Applied Industrial Technologies, Inc. for its stronger recent performance and shareholder returns.
The future growth paths for both companies face challenges. MSC is focused on reinvigorating its sales strategy and defending its core metalworking business from competition, while also trying to expand its non-metalworking MRO offerings. AIT's growth is tied to industrial activity and its M&A strategy. AIT appears to have a slight edge, as its specialized segments like fluid power offer more resilient, higher-margin growth opportunities. MSC's core market is highly cyclical and subject to intense price competition. Neither company has a clear, game-changing growth catalyst, but AIT's strategic positioning in more technical niches seems more favorable. Winner: Applied Industrial Technologies, Inc. for its more stable and defensible growth drivers.
Valuation is where MSC holds a distinct advantage. Reflecting its recent struggles, MSC trades at a significant discount to AIT. Its P/E ratio is often in the low-to-mid teens (~14x), while AIT's is over 20x. MSC also offers a much higher dividend yield, frequently exceeding 4%, compared to AIT's sub-1% yield. For a value or income-oriented investor, MSC is clearly the cheaper stock. The key question is whether this discount is a value trap or a genuine opportunity. Given its operational challenges, the discount is arguably warranted. However, on a pure metrics basis, MSC offers more for less. Winner: MSC Industrial Direct Co., Inc. as the clear value and income choice.
Winner: Applied Industrial Technologies, Inc. over MSC Industrial Direct Co., Inc. Although MSC is cheaper, AIT is the higher-quality operator in its current form. AIT's victory stems from its superior execution, demonstrated by its higher and more stable operating margins (11.5% vs. 10.5%) and better returns on capital. While MSC has a formidable product catalog, it has struggled to translate that into profitable growth, facing persistent margin pressure. AIT's focused strategy on value-added services in defensible niches has proven more resilient. The primary risk for AIT is its own valuation, which is less compelling. The risk for MSC is that it fails to fix its margin issues, turning its cheap valuation into a value trap. For an investor choosing today, AIT's proven operational strength makes it the more reliable investment.
WESCO International operates on a vastly different scale and scope than Applied Industrial Technologies, especially following its transformative acquisition of Anixter in 2020. With revenues exceeding $22 billion, WESCO is a global distribution powerhouse with three main segments: Electrical & Electronic Solutions, Communications & Security Solutions, and Utility & Broadband Solutions. While it does have an industrial MRO business that competes with AIT, this is just one part of a much larger, more complex portfolio. AIT is a pure-play industrial distributor focused on bearings, power transmission, and fluid power. WESCO is a diversified distributor with deep expertise in electrical products, wire, and cable. The comparison is one of a specialist (AIT) versus a massive, diversified conglomerate (WESCO).
Due to its diversification, WESCO's business moat is broader but perhaps less deep in any single area compared to AIT's specialized niches. WESCO's moat is built on its enormous scale ($22.2B revenue), global supply chain capabilities, and long-standing relationships with major suppliers and customers in the utility and construction sectors. Its ability to provide comprehensive project-based solutions gives it a strong advantage. AIT's moat is its technical expertise in mission-critical components, which fosters stickiness with industrial customers. However, WESCO's sheer size gives it a powerful scale advantage that AIT cannot match. Winner: WESCO International, Inc. because its scale and diversification create higher barriers to entry for the overall business.
Financially, the two companies present a contrast in profiles. WESCO's operating margins are lower, typically around 7%, compared to AIT's 11.5%. This reflects WESCO's business mix, which includes lower-margin electrical distribution. However, WESCO's massive revenue base means it generates far more profit in absolute dollars. A key point of differentiation is the balance sheet. WESCO carries a significant debt load from the Anixter acquisition, with a net debt to EBITDA ratio around 3.0x, which is considerably higher than AIT's conservative ~1.5x. This leverage makes WESCO more sensitive to interest rate changes and economic downturns. AIT's balance sheet is much more resilient. Winner: Applied Industrial Technologies, Inc. on the basis of its higher margins and much stronger, less risky balance sheet.
Looking at past performance, WESCO's history is defined by the Anixter merger. Pre-merger, it was a steady but slower-growing company. Post-merger, its revenue and earnings have grown dramatically, but this is largely due to the acquisition, not underlying organic growth. AIT has delivered more consistent, predictable organic growth over the past five years. WESCO's stock performance has been very strong since the merger as investors have rewarded the strategic rationale and successful integration. However, AIT has also been a strong performer. Due to the transformative nature of WESCO's merger, a direct historical comparison is difficult, but AIT has offered a less volatile, more consistent path. Winner: Applied Industrial Technologies, Inc. for its more consistent and predictable historical performance track record.
Future growth for WESCO is heavily tied to secular trends like electrification, data center construction, grid modernization, and 5G buildout. These are powerful, long-term tailwinds that AIT is less exposed to. WESCO's ability to cross-sell products from its legacy and Anixter businesses provides a significant revenue synergy opportunity. AIT's growth is more dependent on general industrial production and its bolt-on acquisition strategy. While solid, AIT's growth drivers are less dynamic than the large-scale secular trends benefiting WESCO. The successful deleveraging of its balance sheet will also unlock significant value for WESCO shareholders. Winner: WESCO International, Inc. due to its exposure to more powerful secular growth markets.
In terms of valuation, WESCO trades at a notable discount to AIT, largely due to its higher leverage and lower margins. WESCO's P/E ratio is often in the low double-digits (~13x), while AIT's is above 20x. On an EV/EBITDA basis, the gap is smaller but still present. This discount reflects the higher perceived risk associated with WESCO's debt and the integration of a massive acquisition. For investors willing to accept that risk, WESCO offers compelling value, with a clear path to multiple expansion as it pays down debt. AIT is priced more like a high-quality, stable operator, which is fair but offers less upside potential from a valuation re-rating. Winner: WESCO International, Inc. for its significantly lower valuation and clear catalyst for a re-rating.
Winner: WESCO International, Inc. over Applied Industrial Technologies, Inc. This verdict comes with a crucial caveat about risk tolerance. WESCO wins due to its greater scale, exposure to powerful secular growth trends like electrification, and a much more attractive valuation (~13x P/E vs. AIT's ~21x). Its path to creating shareholder value through debt reduction and synergy realization is clear. However, its primary weakness and risk is its leveraged balance sheet (~3.0x net debt/EBITDA), which makes it more vulnerable in a recession. AIT is the safer, more conservative choice with a fortress balance sheet and higher margins. But for an investor with a longer time horizon who is comfortable with leverage, WESCO offers a more compelling combination of growth and value.
Ferguson plc is a global distribution giant with a primary focus on plumbing and heating, ventilation, and air conditioning (HVAC) products, mainly in North America. While it is not a direct competitor to AIT across its entire product line, its broad MRO and industrial supply business does overlap. Ferguson is significantly larger than AIT, with annual revenues approaching $30 billion. The key difference lies in their end markets: Ferguson is heavily exposed to residential and non-residential construction and renovation, while AIT is almost entirely focused on the industrial manufacturing and processing sectors. Ferguson's scale, sophisticated supply chain, and private-label offerings give it a formidable position in its core markets, making it a much larger and more diversified entity than the more specialized AIT.
Ferguson's business moat is rooted in its enormous scale and market density. With revenue over six times that of AIT (~$29.5B vs. ~$4.4B), it has immense purchasing power and logistical efficiencies. Its dense network of over 1,700 locations across North America allows it to provide rapid service to contractors, a key differentiator. AIT's moat is built on specialized technical knowledge, but Ferguson's scale-based advantages are more powerful and harder to replicate. Ferguson also has a strong portfolio of private-label brands (~9% of revenue), which enhances margins and customer loyalty. Winner: Ferguson plc due to its overwhelming scale and dominant market position in its core verticals.
From a financial perspective, both companies are strong operators, but Ferguson's scale gives it an edge. Ferguson's operating margin is slightly lower at ~9.5% compared to AIT's ~11.5%, reflecting its different product mix. However, in terms of capital returns, Ferguson's ROIC is exceptionally strong, often exceeding 20%, which is superior to AIT's ~15%. This indicates Ferguson allocates capital more effectively to generate profits. Ferguson maintains a very healthy balance sheet with a net debt to EBITDA ratio of around 1.0x, which is even more conservative than AIT's ~1.5x. Ferguson's ability to generate massive free cash flow allows for both significant reinvestment and substantial shareholder returns. Winner: Ferguson plc for its superior capital allocation and stronger balance sheet.
Historically, Ferguson has a long and impressive track record of performance. It has consistently grown revenue both organically and through a disciplined acquisition strategy, consolidating the fragmented markets it serves. Over the past five years, its revenue and earnings growth have been robust, driven by strong end markets and market share gains. This has translated into excellent total shareholder returns that have generally outpaced those of AIT. AIT has performed well, but Ferguson has operated at a higher level, demonstrating an ability to compound value for shareholders over a very long period. Winner: Ferguson plc for its consistent long-term track record of growth and value creation.
Ferguson's future growth is tied to housing, construction, and infrastructure spending in the U.S., as well as its ongoing efforts to gain market share. While these markets are cyclical, long-term trends around housing shortages and infrastructure renewal provide a favorable backdrop. The company is also expanding into adjacent product categories to fuel further growth. AIT's growth is tied more closely to industrial capital spending and manufacturing output. While both have solid prospects, Ferguson's ability to consolidate its fragmented end markets provides a more controllable and predictable path to growth than AIT's reliance on broader economic activity. Winner: Ferguson plc due to its clear runway for market share consolidation.
In terms of valuation, Ferguson typically trades at a premium to the broader distribution sector, reflecting its high quality and strong market position. Its P/E ratio is often in the low-to-mid 20s, similar to AIT's ~21x. Given Ferguson's larger scale, more conservative balance sheet, and superior track record of capital allocation, its valuation appears more justified than AIT's. An investor is paying a similar multiple for what is arguably a higher-quality, more dominant, and better-diversified business. From a risk-adjusted perspective, Ferguson offers a better value proposition at these levels. Winner: Ferguson plc as its premium valuation is well-supported by superior business fundamentals.
Winner: Ferguson plc over Applied Industrial Technologies, Inc. Ferguson is the superior company and a more compelling long-term investment. Its victory is based on its dominant scale, more diversified and favorable end-market exposure, stronger balance sheet (~1.0x net debt/EBITDA), and a proven history of exceptional capital allocation (~20%+ ROIC). While AIT is a well-managed specialist in the industrial space with attractive margins, it simply does not have the competitive advantages or the market-shaping power of Ferguson. The primary risk for Ferguson is its exposure to the cyclical construction market, but its focus on repair and remodel activity provides a resilient base. AIT's main weakness is its more limited growth ceiling compared to Ferguson's vast and fragmented addressable markets. Ferguson represents a best-in-class operator that justifies its premium valuation.
Genuine Parts Company (GPC) competes with Applied Industrial Technologies primarily through its Industrial Parts Group, which operates under the brand name Motion Industries. Motion is a direct and formidable competitor to AIT, focused on power transmission, bearings, and hydraulic components. However, GPC as a whole is a diversified company, with its larger segment being the iconic NAPA Auto Parts business. This comparison, therefore, is between a focused industrial player (AIT) and a key division (Motion) of a larger, diversified parent company (GPC). Motion Industries is larger than AIT, with annual revenues of around $8.8 billion, giving it a scale advantage in the core industrial distribution market.
Comparing the business moats, Motion Industries, backed by GPC, has a powerful scale-based advantage. Its revenue is roughly double that of AIT (~$8.8B vs. ~$4.4B), giving it superior purchasing power and logistical density with its 500+ locations. Motion, like AIT, builds its moat on technical expertise and deep customer relationships. AIT's focus as a standalone company may allow for a more agile and specialized culture. However, being part of GPC provides Motion with access to cheaper capital and corporate resources that AIT lacks. The brand recognition of Motion is very strong within the industrial community. Winner: Genuine Parts Company (Motion Industries) due to its superior scale and the financial backing of its large parent company.
Analyzing the financials requires looking at GPC as a consolidated entity, which can be misleading as the automotive group has different margin profiles. GPC's overall operating margin is around 8.5%, lower than AIT's ~11.5%. This is due to the lower-margin automotive parts business. However, GPC's Industrial segment (Motion) historically has operating margins in the 10-12% range, making it very comparable to AIT. GPC's balance sheet is solid, with a net debt to EBITDA ratio of ~1.8x, slightly higher than AIT's ~1.5x. As a whole, GPC is a 'Dividend King,' having increased its dividend for over 65 consecutive years, a testament to its long-term financial stability that AIT cannot match. Winner: Tie, as AIT has better-reported company-wide margins, but GPC's industrial segment is comparable, and its dividend history demonstrates superior long-term financial strength.
In terms of past performance, GPC has a legendary track record of consistency and dividend growth. However, its total growth has often been in the low-to-mid single digits, reflecting the maturity of its automotive business. AIT has demonstrated slightly more dynamic revenue and earnings growth in recent years, benefiting from a strong industrial cycle and successful acquisitions. GPC's stock is often valued more for its stability and dividend income, while AIT's has offered more capital appreciation recently. Over a very long horizon (10+ years), GPC has been a phenomenal compounder, but over the last 3-5 years, AIT has often delivered a higher TSR. Winner: Applied Industrial Technologies, Inc. for its stronger recent growth and shareholder returns.
The future growth outlook for GPC's Motion division is solid, driven by industrial automation and the need for more efficient MRO solutions. GPC can also fund larger acquisitions for Motion than AIT can. However, GPC's overall growth will be moderated by the mature U.S. automotive aftermarket. AIT's growth is purely tied to the industrial sector, which can be more cyclical but currently benefits from trends like reshoring of manufacturing. AIT's focused strategy may allow it to capitalize on these trends more effectively. Consensus estimates often project similar low-to-mid single-digit growth for both companies, but AIT has a clearer path to potentially surprise to the upside through M&A. Winner: Applied Industrial Technologies, Inc. for its more focused exposure to industrial growth trends.
Valuation is a clear strength for GPC. It typically trades at a lower P/E ratio than AIT, often in the mid-teens (~16x) compared to AIT's 20x+. GPC also offers a significantly higher dividend yield, currently around 2.7%, which is a major draw for income investors. AIT's yield is below 1%. Investors are paying a lower multiple for GPC's diversified and stable earnings stream and are rewarded with a much larger dividend. AIT's valuation reflects its stronger recent growth but appears expensive relative to GPC. For a value and income-focused investor, GPC is the more attractive stock. Winner: Genuine Parts Company for its lower valuation and superior dividend yield.
Winner: Genuine Parts Company over Applied Industrial Technologies, Inc. This is a close contest, but GPC's Motion Industries division, backed by the financial strength and stability of its parent, emerges as the winner. The victory is predicated on Motion's superior scale in the industrial market and GPC's overall financial profile, which includes a much more attractive valuation (~16x P/E) and a legendary dividend history. AIT has shown stronger growth recently and boasts higher company-wide margins, making it a high-quality operator. However, its higher valuation is a significant drawback. The primary risk for GPC is the maturity of its auto parts business, which could drag on overall growth. For AIT, the risk is justifying its premium valuation if industrial growth slows. GPC offers a more compelling risk/reward proposition for a long-term, income-oriented investor.
Based on industry classification and performance score:
Applied Industrial Technologies (AIT) operates a resilient business model centered on distributing essential industrial parts and providing specialized engineering services. The company's primary strength lies in its extensive physical network of service centers, which enables rapid delivery and crucial technical support, creating a tangible moat against smaller competitors. However, AIT appears to lag industry leaders in digital integration and private label development, which could represent vulnerabilities in an increasingly online and margin-focused market. The investor takeaway is mixed; AIT has a durable, cash-generative core business with a solid moat, but it needs to accelerate its digital and margin-enhancement strategies to keep pace with top-tier peers.
AIT's extensive network of local service centers provides a significant logistical advantage, enabling rapid delivery and high product availability for customers.
With hundreds of service centers, AIT maintains a physical presence close to its key industrial customers across North America. This network density is a crucial competitive advantage in a business where delivery speed is paramount. Being local allows AIT to stock inventory tailored to the needs of nearby customers and provide same-day delivery for critical parts, minimizing costly downtime for manufacturers. This local presence is difficult and expensive for new entrants or online-only players to replicate. While industry leaders like Fastenal may have a greater number of total sites (including vending machines), AIT's network is robust and strategically focused on its core product areas. This physical infrastructure is the backbone of its emergency fulfillment capability and technical support model, directly supporting its primary moat and creating a high barrier to entry for competitors unwilling to make a similar investment in physical assets and local inventory.
The company excels in providing specialized technical support and emergency fulfillment for critical parts, forming the core of its competitive advantage.
AIT's value proposition is built on its ability to act as an expert partner, particularly in technical product categories like bearings, power transmission, and fluid power. The company's network of over 550 service centers and repair shops is staffed with product specialists who can help customers troubleshoot problems and identify the correct components, a service that pure-play online retailers cannot match. This expertise is critical in emergency situations where a down production line can cost a customer thousands of dollars per hour. The high-touch service model, especially within the Engineered Solutions segment which provides custom design and fabrication, creates significant switching costs. Customers rely on AIT's institutional knowledge of their equipment and operations. This deep technical integration and reliable 24/7 support for mission-critical components is a powerful moat that justifies premium pricing and fosters long-term customer loyalty.
AIT's private label program is not a significant contributor to its business, representing a missed opportunity for margin enhancement compared to leading peers.
Unlike competitors such as Grainger (with its Zoro and Grainger-branded products) and Fastenal, who have successfully used private label brands to boost gross margins and offer value-priced alternatives, AIT's private label strategy is underdeveloped. The company primarily focuses on distributing products from leading third-party manufacturers. While this aligns with its branding as a provider of high-quality, reliable components, it limits its ability to capture additional margin. A strong private label program can increase profitability and give a distributor more control over its supply chain and product assortment. AIT's lack of a scaled private brand portfolio means it is more reliant on the pricing power of its suppliers and has fewer levers to pull to enhance gross margins. This is a strategic weakness relative to the broader MRO distribution industry, where private labels are an increasingly important part of the business model.
AIT offers vendor-managed inventory and other on-site services that successfully embed its operations within key customers, increasing wallet share and customer retention.
Applied Industrial Technologies provides vendor-managed inventory (VMI) services and has on-site personnel at customer locations to help manage their MRO supply chain. These embedded services are a powerful tool for increasing customer stickiness. By taking over the management of a customer's storeroom, AIT becomes deeply integrated into their daily operations, making it difficult and disruptive for the customer to switch to a competitor. While Fastenal is the clear industry leader in this area with its extensive network of vending machines and on-site locations, AIT's offering is a core part of its value proposition for larger customers. These programs ensure AIT captures a greater share of that customer's MRO spend and provides a recurring revenue stream. The high retention rates associated with these embedded solutions contribute significantly to the company's economic moat.
AIT's digital offerings are functional but lag behind industry leaders, representing a competitive vulnerability rather than a source of moat.
While Applied Industrial Technologies has an e-commerce platform and offers digital integration services like EDI and punchout catalogs, its digital penetration is not a standout strength when compared to top-tier competitors like Grainger or MSC Industrial. These peers generate a significantly larger portion of their sales through digital channels and have more sophisticated online tools. For MRO distributors, a seamless digital experience lowers the cost-to-serve and deeply embeds them into a customer's procurement workflow, creating stickiness. AIT's business model remains heavily reliant on its physical service centers and expert salesforce, which is a strength for complex products but less efficient for routine reorders. The company does not consistently disclose specific metrics like digital sales mix or punchout customer counts, but its strategy and commentary suggest digital is a supporting tool rather than the primary driver of its moat. This lag in digital leadership presents a risk, as customers may gravitate towards competitors with more user-friendly and efficient online procurement systems for their less technical purchases.
Applied Industrial Technologies shows a strong and stable financial profile. The company is consistently profitable with operating margins around 11%, and more importantly, it converts these profits into robust free cash flow, generating $465.2 million annually. Its balance sheet is very safe, with low debt ($572.3 million) and a high current ratio of 3.55. While revenue growth is modest, the combination of high-quality earnings, a secure balance sheet, and shareholder-friendly capital returns presents a positive takeaway for investors.
AIT maintains strong and stable gross margins around `30%`, which is a healthy level for a distributor and indicates effective pricing discipline and product mix management.
Applied Industrial Technologies consistently demonstrates its ability to protect profitability at the gross level. For fiscal year 2025, its gross margin was 30.31%, and it remained stable in the subsequent quarters at 30.6% and 30.13%. This level of margin is strong for the broadline distribution industry. While specific data on private label mix or vendor rebates is not available, the consistency of this metric suggests that AIT effectively manages its purchasing costs, passes on price increases from suppliers, and maintains a profitable product mix. This stability is a key strength, as it forms the basis for the company's solid overall profitability.
The company effectively manages its selling, general, and administrative (SG&A) expenses, keeping them stable relative to sales and allowing for strong, consistent operating profitability.
AIT's SG&A expenses are its largest operating cost, but they are managed with discipline. In the most recent quarter, SG&A was $229.33 million on revenue of $1.2 billion, representing 19.1% of sales. This is consistent with the annual figure of 19.3%. This stability in the SG&A-to-sales ratio prevents costs from eroding profits and underpins the company's consistent ~11% operating margin. While metrics like sales per employee are not provided, the financial outcome implies good operational leverage and productivity, where the company effectively scales its cost base with its revenue.
The company's inventory turnover of approximately `6.4x` is solid, reflecting efficient management of its working capital and balancing product availability with capital efficiency.
For a distributor managing a vast number of products, inventory management is critical. AIT reported an inventory turnover of 6.4x for the fiscal year and 6.53x in the most recent quarter. This is a healthy rate for the MRO distribution industry, suggesting that inventory is not sitting on shelves for too long, which minimizes the risk of obsolescence and reduces the amount of cash tied up in stock. The total inventory value was $521.68 million in the latest quarter, a manageable figure relative to its sales volume. While GMROII data is unavailable, the combination of efficient turns and strong gross margins points to productive and profitable inventory management.
AIT's ability to hold operating margins steady around `11%` is clear evidence of its strong pricing power and its effectiveness in passing through supplier cost inflation to customers.
The ultimate test of pricing power for a distributor is margin stability. AIT's operating margin has been remarkably consistent, registering 10.96% for the last fiscal year and hovering near that level in recent quarters (11.03% and 10.76%). This performance is strong for the industry and indicates that the company is not being squeezed between rising supplier costs and customer price resistance. The lack of margin compression, even as revenues fluctuate slightly, shows AIT successfully implements price adjustments to protect its profitability, a crucial capability for long-term value creation.
AIT exhibits excellent working capital discipline, consistently converting a high percentage of its earnings into cash, which is a sign of strong financial quality.
A standout feature of AIT's financial performance is its cash conversion. For the last fiscal year, cash flow from operations was $492.39 million, which is 125% of its net income of $392.99 million. This is an exceptionally strong result and indicates that the company is highly efficient at managing its cash conversion cycle—the time it takes to turn inventory and sales into cash. While the specific number of days for the cash conversion cycle is not provided, the high cash flow relative to income and the very healthy current ratio of 3.55 confirm that working capital is a source of strength, not a drain on resources.
Applied Industrial Technologies has demonstrated a strong historical performance over the last five years, characterized by impressive profit growth and margin expansion. Key strengths include a significant increase in operating margin from 7.87% to 10.96% and a reduction in its debt-to-EBITDA ratio from 2.62x to a more conservative 1.24x. While revenue growth was robust initially, it has slowed considerably in the last two years, which is a key weakness to monitor. The company has consistently generated positive free cash flow and rewarded shareholders with rising dividends. Overall, the investor takeaway is positive, reflecting excellent operational management and financial discipline despite a recent slowdown in sales.
The company has demonstrated exceptional margin performance, not just maintaining stability but achieving significant expansion even as revenue growth slowed, proving its pricing power and cost discipline.
AIT's performance showcases impressive margin resilience and expansion. Gross margin has been steady, moving from 28.91% in FY2021 to 30.31% in FY2025. More impressively, the operating (EBIT) margin showed a clear upward trend, rising from 7.87% to 10.96% over the same period. Crucially, during the revenue growth slowdown in FY2024 (revenue growth of 1.51%) and FY2025 (1.88%), operating margins held firm at peak levels (11.07% and 10.96% respectively). This indicates strong pricing discipline, effective cost management, and a favorable sales mix that protect profitability even when the top line is not growing rapidly. This ability to protect and even grow margins during a slowdown is a hallmark of a high-quality, well-managed industrial distributor.
The company has maintained a consistent acquisition strategy while simultaneously improving margins and reducing debt, indicating its merger and acquisition playbook is effective and accretive to financial performance.
Applied Industrial Technologies has a track record of making acquisitions, as evidenced by cash outflows for acquisitions in each of the last five years, including a significant $293.41 million in FY2025. A successful M&A strategy should result in improved financial metrics, and AIT has delivered on this front. Over the same period of active acquisitions, the company's operating margin expanded, and its leverage ratio (Debt/EBITDA) was cut in half from 2.62x to 1.24x. This dual improvement strongly suggests that acquisitions have been integrated smoothly, contributing to earnings and cash flow without overburdening the balance sheet. If these deals were underperforming, one would expect to see margin pressure or rising debt, but the opposite has occurred, validating the company's disciplined approach to M&A.
Although direct service metrics are not disclosed, the company's consistent improvement in gross margins and strong revenue growth serve as strong proxies for high service levels and customer satisfaction.
In the MRO distribution industry, service levels—such as on-time, in-full (OTIF) delivery—are a critical competitive differentiator. Poor service leads to lost customers and pricing pressure. While AIT does not publish its OTIF rates, its financial results point towards operational excellence. The company's gross margin has steadily improved from 28.91% in FY2021 to 30.31% in FY2025. This ability to maintain and expand margins, particularly in a competitive industry, suggests that customers value AIT's offering and are willing to pay for its reliability. Consistently growing revenue and profits is difficult without satisfying customers, making the strong financial performance a reliable indicator of healthy service levels and operational execution.
While direct digital metrics are not provided, the company's significant and sustained operating margin expansion from `7.87%` to `10.96%` over five years strongly suggests successful digital adoption is reducing the cost to serve.
Applied Industrial Technologies' past performance provides strong indirect evidence of successful digital initiatives. In the distribution industry, digital platforms like e-commerce and inventory management systems are critical for improving efficiency and lowering operating costs. The company's operating margin has consistently expanded from 7.87% in FY2021 to 10.96% in FY2025, a period that also saw significant revenue growth. This margin improvement, even as sales growth slowed in FY2024 and FY2025, indicates that the company has implemented effective cost controls and operational efficiencies, which are common benefits of a successful digital strategy. These initiatives likely helped streamline ordering, optimize logistics, and improve customer retention without the need for proportional increases in sales staff or physical infrastructure, thereby boosting profitability.
While same-branch data is unavailable, the company's very strong revenue growth in FY2022 and FY2023, which likely outpaced the market, suggests a period of significant market share gains.
Without specific same-branch sales data, we can use the company's overall revenue growth as a proxy for market penetration. In FY2022 and FY2023, AIT reported robust revenue growth of 17.8% and 15.8%, respectively. This level of growth likely exceeded the general rate of industrial production and activity, which points to the company successfully capturing market share from competitors. While growth has since slowed to the low single digits, this is more indicative of a normalizing macroeconomic environment rather than a failure in execution. The prior period of accelerated growth established a larger base of business and demonstrated the company's ability to capitalize on favorable market conditions to expand its footprint.
Applied Industrial Technologies (AIT) is positioned for steady, albeit modest, future growth driven by its expertise in technical industrial products. The company benefits from tailwinds like U.S. industrial reshoring and increasing factory automation, which fuel demand for its core bearings, power transmission, and fluid power solutions. However, AIT faces significant headwinds from digitally advanced competitors like Grainger and on-site service leaders like Fastenal. The company's underdeveloped digital platform and private label offerings represent key weaknesses that could limit market share gains and margin expansion. The investor takeaway is mixed: AIT's growth outlook is stable and supported by a strong technical niche, but it is unlikely to outperform the market without significant strategic improvements in its weaker areas.
AIT provides essential VMI and on-site services that increase customer stickiness, but its offering is not a market-leading growth engine and lags the scale and technology of top competitors.
Applied Industrial Technologies' Vendor-Managed Inventory (VMI) and other on-site services are an important part of its value proposition for large customers, helping to secure long-term relationships and increase share of wallet. These embedded solutions are effective at creating high switching costs. However, AIT is a follower, not a leader, in this space. Its network of on-site solutions is significantly smaller and less technologically advanced than that of Fastenal, the clear market leader. While AIT will likely continue to deploy these solutions to defend and grow its key accounts, it is not positioned to use this capability as an aggressive tool for market share capture. Therefore, it supports the existing business rather than being a significant driver of future growth.
The company's private label program is underdeveloped, representing a significant missed opportunity to enhance gross margins and competitiveness relative to peers.
Unlike industry leaders Grainger and Fastenal, AIT has not developed a robust private label strategy. A strong private brand portfolio allows distributors to offer value-priced alternatives to national brands, which can increase gross margins, build customer loyalty, and provide more control over the supply chain. AIT's focus remains on distributing products from leading third-party manufacturers. While this reinforces its image as a provider of high-quality components, it leaves significant margin on the table and limits its ability to compete on price for certain product categories. This lack of a meaningful private label offering is a clear strategic weakness that will constrain future profitability growth compared to competitors.
The company's digital platform is functional but significantly lags industry leaders, representing a key strategic weakness that limits growth in an increasingly online market.
AIT's future growth is hampered by its underdeveloped digital capabilities. While the company offers e-commerce, EDI, and punchout solutions, these tools lack the sophistication and user-friendliness of platforms from competitors like Grainger, which generates the majority of its revenue through digital channels. AIT does not disclose its digital sales mix, but its business model remains heavily reliant on its traditional high-touch salesforce and physical service centers. This lag in digital transformation makes it difficult for AIT to compete effectively for less-technical, commoditized product sales and increases its cost-to-serve for simple reorders. Without a more aggressive digital growth plan, AIT risks losing wallet share to more convenient online competitors.
AIT's investments in supply chain and DC automation are necessary for efficiency but are more about maintaining operational parity than creating a distinct competitive advantage.
Applied Industrial Technologies is making foundational investments in its distribution centers and supply chain to improve efficiency. These efforts are crucial for managing a vast inventory and ensuring high service levels. However, the company's capital expenditures, with around $24 million allocated to its Service Center segment annually, are modest for a company of its size and suggest an incremental approach to modernization rather than a large-scale, transformative automation push seen by some logistics-focused peers. While these investments will help control costs and support the company's service promises, they are unlikely to fundamentally change its competitive positioning or become a primary growth driver. The focus appears to be on keeping pace with industry standards rather than innovating ahead of them.
AIT's strong position across a diverse set of resilient industrial end markets and its ability to cross-sell technical products and services provide a stable foundation for future growth.
A key strength for AIT's future growth is its broad diversification across numerous industrial end markets, including food processing, utilities, and general manufacturing, which provides resilience through economic cycles. The company has a proven strategy of using its technical expertise in one area, such as fluid power, to introduce customers to its broader portfolio of bearings, power transmission, and general MRO products. The Engineered Solutions segment acts as a powerful entry point into key accounts, creating opportunities to embed the Service Center business. This ability to penetrate accounts and expand wallet share through cross-selling is a reliable, low-risk driver of organic growth and will continue to support the company's performance.
As of January 13, 2026, with a stock price of $273.70, Applied Industrial Technologies, Inc. (AIT) appears to be fairly valued, leaning towards slightly overvalued. The stock is currently trading in the upper third of its 52-week range, suggesting strong recent performance is already reflected in the price. Key valuation metrics such as the trailing P/E ratio of 26.7x and EV/EBITDA of 18.2x are elevated compared to the company's own historical averages. While the company's strong free cash flow yield and superior profitability justify a premium, the current multiples imply that significant future growth is already priced in. The investor takeaway is neutral; while AIT is a high-quality business, its current stock price offers little margin of safety for new investors.
With an EV/Sales ratio of 2.26x, the company is valued richly on a sales basis, and since its physical network is a capability rather than a dominant advantage, the high valuation is not backed by superior network productivity.
Metrics like EV per branch are unavailable, but the EV/Sales multiple of 2.26x serves as a proxy for how much the market values its overall operational footprint for every dollar of revenue. This multiple is relatively high for a distributor. The "Business and Moat" analysis concluded that while AIT's network is essential, it lacks the scale or density of leaders like Fastenal. Because the network itself is not a source of competitive advantage, the high EV/Sales ratio suggests the valuation is based more on margin performance and growth expectations rather than superior asset productivity. The company is not demonstrably more efficient with its physical assets than its top competitors, making this high productivity-based multiple a point of valuation risk.
The company's return on invested capital of 13.4% is well above its likely cost of capital, indicating it consistently creates economic value for shareholders, which supports a premium valuation.
AIT's reported return on invested capital (ROIC) is 13.42%, while its return on equity (ROE) is even higher at 22.1%. While a precise WACC is not calculated, a conservative estimate for a stable company like AIT would be in the 8-10% range. The spread between its ROIC of 13.4% and its estimated WACC is significantly positive, demonstrating that management is an effective allocator of capital and that its investments generate returns that exceed their cost. This consistent value creation, as evidenced by the expansion of ROE from 16.3% to over 22% noted in the "Past Performance" analysis, is a key reason the stock deserves to trade at a premium to less profitable peers.
AIT trades at a justifiable premium to its direct peers, which is warranted by its superior operating margins, consistent execution, and stronger cash flow conversion.
AIT's TTM EV/EBITDA multiple of 18.2x represents a significant premium, not a discount, to the peer median, particularly when compared to a direct competitor like MSC Industrial (13.5x EV/EBITDA). This factor is marked as "Pass" because the premium is earned and justified. As established in prior analyses, AIT's specialized, service-intensive model generates more stable and higher operating margins (~11%) than many peers. Its consistent free cash flow, which exceeds net income, is a mark of quality that the market rightly rewards. Therefore, the absence of a discount is not a negative signal but rather a reflection of AIT's superior operational performance and financial health.
The company's strong free cash flow generation and solid balance sheet provide a substantial cushion, suggesting its intrinsic value would hold up reasonably well under adverse economic scenarios.
While specific IRR data is unavailable, a sensitivity analysis on the DCF model serves as a robust proxy. The company’s financial strength, underscored by a low debt-to-equity ratio of 0.3 and an FCF/EBITDA conversion rate well over 80%, indicates high resilience. A stress test involving a 100 bps reduction in long-term growth assumptions (from 6% to 5%) and a 50 bps increase in the discount rate (to 9.5%) still results in a fair value midpoint of approximately $250. This value, while lower, is not dramatically below the current trading range, demonstrating that the valuation is not built on fragile assumptions and has a decent margin of safety against moderate operational headwinds.
AIT's strong free cash flow yield of ~4.4% and a history of converting over 100% of net income into cash flow demonstrate superior working capital management and high-quality earnings.
This is a core strength of AIT's valuation case. The company’s TTM FCF of $465.2 million against a market cap of $10.47 billion produces a healthy FCF yield of ~4.4%. More importantly, the "Financial Statement Analysis" highlighted that cash flow from operations consistently exceeds net income (125% conversion in the last fiscal year), which points to excellent management of the cash conversion cycle. This high FCF/EBITDA conversion demonstrates that AIT's reported profits are backed by real cash, a crucial sign of financial health that supports a premium valuation and provides funds for dividends, buybacks, and acquisitions.
The most significant risk for AIT is its direct exposure to the economic cycle. As a key supplier to industrial companies, its financial results are tightly linked to manufacturing output and capital spending. During an economic downturn, customers delay or reduce maintenance, repair, and operations (MRO) budgets, which directly translates to lower sales and profits for AIT. Looking forward, a prolonged period of high interest rates could cool industrial activity, while persistent inflation threatens to squeeze AIT's gross margins if it cannot consistently pass rising product costs on to its customers. A future recession or a sharp decline in industrial production remains the most substantial threat to the company's earnings.
The industrial distribution landscape is intensely competitive, posing an ongoing risk to AIT's market share and profitability. The company competes against industrial giants like W.W. Grainger and Fastenal, numerous smaller regional distributors, and increasingly capable e-commerce platforms. This environment limits pricing power and creates a constant threat of margin erosion. Furthermore, AIT's role as a middleman makes it vulnerable to global supply chain disruptions. Any future geopolitical conflicts, trade disputes, or supplier issues could lead to product shortages and higher logistics costs, potentially damaging its reputation for reliability and its ability to serve customers on time.
A core pillar of AIT's growth strategy involves acquiring smaller distributors, which introduces considerable execution risk. While this strategy has historically expanded its market presence and product lines, it is not without peril. There is always a risk of overpaying for a target company, struggling to integrate different corporate cultures and IT systems, or failing to realize the expected synergies. These acquisitions are often funded with debt, and a large deal could strain AIT's balance sheet and increase its financial leverage. Careful management of its debt, which currently sits at a reasonable level, will be critical to navigating any future economic weakness while continuing its acquisition strategy.
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