Atkore has gotten torched over the last six months - since September 2024, its stock price has dropped 26% to $66 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Atkore, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free .
Despite the more favorable entry price, we're cautious about Atkore. Here are three reasons why ATKR doesn't excite us and a stock we'd rather own.
Why Is Atkore Not Exciting?
Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.
1. Core Business Falling Behind as Demand Declines
In addition to reported revenue, organic revenue is a useful data point for analyzing Electrical Systems companies. This metric gives visibility into Atkore’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, Atkore’s organic revenue averaged 12.2% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Atkore might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).
2. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Atkore, its EPS declined by more than its revenue over the last two years, dropping 25.6%. This tells us the company struggled to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Atkore’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Atkore’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 7.5× forward price-to-earnings (or $66 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere. Let us point you toward one of our top digital advertising picks .
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