The past six months have been a windfall for Allient’s shareholders. The company’s stock price has jumped 148%, hitting $51.74 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Allient, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.
Why Is Allient Not Exciting?
Despite the momentum, we're swiping left on Allient for now. Here are three reasons there are better opportunities than ALNT and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Allient’s sales grew at a mediocre 7.4% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector.
2. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Allient, its EPS declined by more than its revenue over the last two years, dropping 12.6%. This tells us the company struggled to adjust to shrinking demand.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Allient historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Allient isn’t a terrible business, but it isn’t one of our picks. Following the recent surge, the stock trades at 24.6× forward P/E (or $51.74 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
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