APD, AIR Products and Chemicals, Inc.
We serve a broad range of industries, including refining, chemicals, metals, electronics, manufacturing, medical, and food, providing essential industrial gases, related equipment, and applications expertise.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- A capital-intensive business, run on heavy physical assets that have to be kept working.
- Situation
- Unprofitable growth. no operating profit yet, judge it on revenue growth, gross-margin trajectory, cash burn and runway, never on an earnings multiple. Distress / turnaround. thin interest coverage or cash-burning operations against real debt, the first questions are liquidity and the maturity wall, not growth. Capital build-out. capital spending has surged to 58% of sales, today's earnings are charged less depreciation than tomorrow's will be.
- What moves the needle
- How hard the assets work, and what the inputs cost. What decides it: utilization, how much of the capex merely keeps the assets running, and what a downturn does to a heavy fixed-cost base.
- Is it a good business?
- Return on capital has sat near the cost of capital (median 11%). This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the 10-K is where you look.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →61% of revenue comes from outside the United States.
- Other foreign operations45%$5.4B
- United States39%$4.7B
- China16%$1.9B
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $7.5B | $8.2B | $8.9B | $8.9B | $8.9B | $10.3B | $12.7B | $12.6B | $12.1B | $12.0B | $12.5B |
| Operating marginOp. mgn | 20.5% | 17.6% | 22.0% | 24.0% | 25.3% | 22.1% | 18.4% | 19.8% | 36.9% | −7.3% | 18.4% |
| Net incomeNet inc. | $631M | $3.0B | $1.5B | $1.8B | $1.9B | $2.1B | $2.3B | $2.3B | $3.8B | ($395M) | $2.1B |
| EPS (diluted)EPS | $2.89 | $13.65 | $6.78 | $7.94 | $8.49 | $9.43 | $10.14 | $10.33 | $17.18 | $-1.77 | $9.45 |
| Owner earningsOwner earn. | — | — | — | — | — | — | — | — | — | — | ($3.6B) |
| ROICROIC | 8% | 12% | 12% | 14% | 12% | 11% | 11% | 9% | 13% | -2% | 6% |
| CapexCapex | $908M | $1.0B | $1.6B | $2.0B | $2.5B | $2.5B | $2.9B | $4.6B | $6.8B | $7.0B | $5.4B |
| Capex / revenueCapex/rev | 12.1% | 12.7% | 17.6% | 22.3% | 28.3% | 23.9% | 23.0% | 36.7% | 56.2% | 58.3% | 43.1% |
| Capex vs depreciationCapex/dep | 1.06× | 1.20× | 1.62× | 1.84× | 2.12× | 1.86× | 2.19× | 3.41× | 4.68× | 4.49× | 3.44× |
| Total debtDebt | $5.3B | $4.0B | $3.8B | $3.3B | $7.9B | $7.6B | $7.6B | $10.3B | $14.2B | $17.7B | $17.7B |
| Cash & investmentsCash+inv | $1.3B | $3.7B | $3.0B | $2.4B | $6.4B | $5.8B | $3.3B | $1.9B | $3.0B | $1.9B | $951M |
| Net debt / (cash)Net debt | $4.0B | $285M | $837M | $911M | $1.5B | $1.8B | $4.3B | $8.4B | $11.2B | $15.8B | $16.7B |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? -4.1×Does not cover its interestOperating income ($877M) ÷ interest expense $214M
A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.
- Debt against an operating lossTotal debt $17.7B · operating income ($877M)
There's debt but no operating profit to measure it against, understand that combination before anything else about the company.
- Debt, net of cash $15.8BNet debtCash $1.9B − debt $17.7B
Netting $1.9B of cash and short-term investments against $17.7B of debt leaves $15.8B owed. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- TightDSO 58 + DIO 34 − DPO 64 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- Below averageNOPAT ($693M) ÷ invested capital $30.9B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Consumes cashOwner Earnings ($5.3B) = operating cash $1.8B − capex $7.0B
What an owner could take out without starving the business. That's -44% of revenue. Treating stock comp as the real expense it is (less $76M of SBC) leaves ($5.3B). Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Loss, but cash-generativeNet income ($395M) · cash from operations $1.8B
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.
How is the cash used?
- No surplus to allocate
The business didn't generate positive Owner Earnings this year, so any distributions came from the balance sheet or borrowing, not from operations.
- Investing or harvesting? 4.49×ExpandingCapex $7.0B ÷ depreciation $1.6B
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 9 of 10
Lost money in 1 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 0 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 20% (FY2016) → −7% (FY2025)
Margins slipped over the record, competition or costs are biting in.
- Reinvestment, incremental ROIC 2%
Reinvested capital earned only a modest return, growth is getting expensive.
- Worst year 2025 · −7.3% op. margin
Operations went underwater in 2025, understand why before trusting the good years.
- Share count +0.2%/yr
Roughly flat share count, little dilution, little buyback.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$76M
The slice of the business handed to employees in shares this year, 1% of revenue. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
2 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $12.0B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 1.38×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $17.7B vs $1.6B WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability NearA profit every year (10-yr record) · 1 loss year
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth NearEarnings +33% over the record · +12%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $-1.77/share and book value $67.47/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFOwner earnings are negative today, so the usual reverse-DCF has nothing to grow. But that's exactly when a price makes its boldest promise. So we flip the question: type a price, and see the future profitability you'd have to believe to justify it.
Enter a price to run it.
It flips the reverse-DCF: the company must reach owner earnings that, valued at a mature multiple and discounted back at your rate, equal today's market cap, shown as the margin it must earn on revenue grown at your rate, from negative today. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this is for the genuinely unprofitable.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Customer concentrationBusiness
Who the revenue leans on. When one buyer is a large slice of sales, that buyer holds the pricing power, and its troubles become the company's.
“We do not have a homogeneous customer base or end market, and no single customer accounts for more than 10% of our consolidated sales.”
From the recordRevenue exposed (TTM)$12.5B - Concentrated dependenceBusiness
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“While the patents and licenses are considered important, we do not consider our business as a whole to be materially dependent upon any particular patent, patent license, or group of patents or licenses.”
From the recordOwner-earnings margin at stake (TTM)−29% - Debt terms & refinancingMD&A
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“Various debt agreements to which we are a party include financial covenants and other restrictions, including restrictions pertaining to the ability to create property liens and enter into certain sale and leaseback transactions.”
From the recordBalance sheet (TTM)$15.8B net debt · operating profit doesn't cover interest - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“Protecting our intellectual property is critical to our technological development, and we may suffer competitive harm from infringement on such rights.”
A judgment, not a number, weigh it against the filing yourself. - Regulation & policyMD&A
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“Tax on Repatriation of Foreign Earnings During the second quarter of fiscal year 2025, we recorded an income tax expense of $31.4 related to estimated withholding taxes on foreign earnings that we no longer intend to indefinitely reinvest.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “For additional information regarding our supply modes and business segments, refer to Note 7, Revenue Recognition , and Note 26, Business Segment and Geographic Information , to the consolidated financial statements. 2025 IN SUMMARY Fiscal year 2025 was a transitional year for Air Products, marked b…”
- “The table below summarizes the major factors that impacted consolidated sales for the periods presented: Volume (4 %) Price 1 % Energy cost pass-through to customers 2 % Currency — % Total Consolidated Sales Change (1 %) Sales of $12.0 billion decreased 1%, or $63.3, as lower volumes of 4% were part…”
- “(B) Gain on the sale of a regional office in Hersham, England, is reflected on the consolidated income statements within "Other income (expense), net." (C) The per share impact reflected within "Gain on de-designation of cash flow hedges" was calculated based on an after-tax gain attributable to Air…”
- “In fiscal year 2025, a pre-tax loss from discontinued operations of $10.6 ($8.0 after tax, or $0.04 per share) was recorded in the third quarter primarily to increase our existing liability for retained environmental remediation obligations related to production facilities in the atmospheric emulsio…”
- “For example, in fiscal year 2025, we cancelled a project to build a green liquid hydrogen project in the U.S., based in part on a regulatory development that rendered existing hydroelectric power supply ineligible for the Clean Hydrogen Production Tax Credit (45V) and incurred a significant impairme…”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Chemicals
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| REGNRegeneron Pharmaceuticals, Inc. | $14.3B | 97% | 24.9% | 10% | 28% |
| ELEstee Lauder Companies Inc | $14.3B | 74% | -5.5% | -7% | 5% |
| MOSMosaic Co | $12.1B | 16% | 6.8% | 3% | -4% |
| APDAIR Products and Chemicals, Inc. | $12.0B | 31% | -7.3% | -2% | -44% |
| VRTXVertex Pharmaceuticals Inc / MA | $12.0B | 86% | 34.8% | 26% | 27% |
| IFFInternational Flavors & Fragrances Inc | $10.9B | 36% | -3.5% | -2% | 2% |
| BIIBBiogen Inc. | $9.9B | 76% | 28.7% | 11% | 21% |
| ZTSZoetis Inc. | $9.5B | 72% | 37.8% | 26% | 24% |