2 Reasons to Like AYI and 1 to Stay Skeptical

October 14, 2025 at 00:02 AM EDT

AYI Cover Image

The past six months have been a windfall for Acuity Brands’s shareholders. The company’s stock price has jumped 50.6%, hitting $359.63 per share. This run-up might have investors contemplating their next move.

Is now still a good time to buy AYI? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free for active Edge members.

Why Does Acuity Brands Spark Debate?

One of the pioneers of smart lights, Acuity (NYSE: AYI) designs and manufactures light fixtures and building management systems used in various industries.

Two Positive Attributes:

1. Elite Gross Margin Powers Best-In-Class Business Model

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Acuity Brands has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 44.5% gross margin over the last five years. Said differently, roughly $44.48 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue. Acuity Brands Trailing 12-Month Gross Margin

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Acuity Brands’s EPS grew at a spectacular 16.9% compounded annual growth rate over the last five years, higher than its 5.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Acuity Brands Trailing 12-Month EPS (Non-GAAP)

One Reason to be Careful:

Core Business Falling Behind as Demand Plateaus

Investors interested in Electrical Systems companies should track organic revenue in addition to reported revenue. This metric gives visibility into Acuity Brands’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Acuity Brands failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Acuity Brands might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). Acuity Brands Organic Revenue Growth

Final Judgment

Acuity Brands has huge potential even though it has some open questions, and after the recent surge, the stock trades at 18× forward P/E (or $359.63 per share). Is now the time to buy despite the apparent froth? See for yourself in our comprehensive research report, it’s free for active Edge members .

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