Over the last six months, Apogee’s shares have sunk to $45.51, producing a disappointing 5.8% loss - a stark contrast to the S&P 500’s 16.2% gain. This might have investors contemplating their next move.
Is there a buying opportunity in Apogee, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Apogee Will Underperform?
Despite the more favorable entry price, we don't have much confidence in Apogee. Here are three reasons why APOG doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Apogee struggled to consistently increase demand as its $1.38 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Apogee’s revenue to rise by 3%. While this projection implies its newer products and services will fuel better top-line performance, it is still below average for the sector.
3. EPS Growth Has Stalled 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.
Apogee’s flat EPS over the last two years was weak. On the bright side, this performance was better than its 2.4% annualized revenue declines.
Final Judgment
Apogee doesn’t pass our quality test. After the recent drawdown, the stock trades at 10.9× forward P/E (or $45.51 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment. We’d recommend looking at the most dominant software business in the world.
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