Atkore shares fell by -2.8% during the day's afternoon session, and are now trading at a price of $131.41. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Atkore Shares Are Inexpensive:
Atkore Inc. engages in the manufacture and sale of electrical, mechanical, safety, and infrastructure products and solutions in the United States and internationally. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Atkore has a trailing 12 month P/E ratio of 7.6 and a P/B ratio of 3.34.
When we divide Atkore's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -2.79. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Overview of the Company's Finances:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $1,835 | $1,917 | $1,765 | $2,928 | $3,914 | $3,685 |
| Gross Margins | 24% | 26% | 28% | 38% | 42% | 40% |
| Operating Margins | 10.0% | 12.0% | 14.0% | 27.0% | 32.0% | 28.0% |
| Net Margins | 7.0% | 7.0% | 9.0% | 20.0% | 23.0% | 22.0% |
| Net Income (MM) | $137 | $139 | $152 | $588 | $913 | $801 |
| Net Interest Expense (MM) | $27 | $11 | $3 | $18 | $0 | -$8 |
| Depreciation & Amort. (MM) | $67 | $72 | $74 | $79 | $84 | $103 |
| Earnings Per Share | $2.53 | $2.91 | $3.17 | $12.43 | $20.63 | $23.72 |
| Diluted Shares (MM) | 54 | 48 | 48 | 47 | 44 | 34 |
| Free Cash Flow (MM) | $107 | $175 | $215 | $508 | $651 | $802 |
| Capital Expenditures (MM) | $39 | $35 | $34 | $64 | $136 | $176 |
| Net Current Assets (MM) | -$595 | -$497 | -$285 | $124 | $27 | $89 |
| Long Term Debt (MM) | $878 | $845 | $764 | $759 | $761 | $762 |
| Net Debt / EBITDA | 3.56 | 2.3 | 1.54 | 0.3 | 0.35 | 0.4 |
Atkore benefits from growing revenues and increasing reinvestment in the business, exceptional EPS growth, and a pattern of improving cash flows. The company's financial statements show low leverage and decent operating margins with a positive growth rate. However, the firm has slimmer gross margins than its peers.
