​How Apogee Enterprises Is a Building Bet

MoneyShow  |


A drop-off in earnings can be a sign of weakness. But often the weakness is only temporary, and the resultant price decline provides opportunities for investors who can look past the near-term future, says Doug Gerlach, editor of Small Cap Informer.

In our view, Apogee Enterprises (APOG) is priced for investors who can see the potential offered by the company over the next few years instead of the next few months, and so it is one of this issue’s featured stocks.

The company designs and develops glass and metal products for enclosing commercial buildings. These often serve as the “skin” of skyscrapers and other major structures.

While aesthetically attractive, these systems can also reduce energy consumption and protect against hurricanes and windstorms.

Opportunities to retrofit buildings (to take advantage of energy savings and breathe new life into older structures) is also a growth area for the company.

In June 2017, Apogee completed an acquisition of EFCO, an architectural framing company with a track record of growth, a presence in less-cyclical smaller U.S. projects, and particular strength in educational buildings.

EFCO is expected to be accretive to fiscal year 2018 EBITDA and add more than $200 million in revenues in that year.

Apogee provides full-year fiscal 2018 outlook for revenue growth of 24% to 26%, EPS of $3.05 to $3.25, and adjusted EPS of $3.40 to $3.60.

Analysts are looking for average annual growth of revenues of 19.5% in the next two fiscal years. We project EPS and revenues growth of 14% annually through 2021, though we do expect some choppiness in results along the way.

Returns on equity have also been increasing steadily to a superb 21.0% in 2016. With EPS reaching $5.72 in fiscal 2021, a projected high P/E of 22 would support a high price of $126. On the downside, the low end of Apogee’s fiscal 2018 guidance is $3.40.

Our low P/E ratio of 11.0 is lower than the lowest P/E of the last five years and provides support for a downside price of $37.40. From the recent price of $46, the upside-to-downside ratio is 9.4:1 and a projected annual total return is 23.5%.

Doug Gerlach is president of ICLUBCentral Inc., a wholly-owned subsidiary of Better Investing.

Subscribe to Small Cap Informer here…

About MoneyShow.com: Founded in 1981, MoneyShow is a privately held financial media company headquartered in Sarasota, Florida. As a global network of investing and trading education, MoneyShow presents an extensive agenda of live and online events that attract over 75,000 investors, traders and financial advisors around the world.

Stock price data is provided by IEX Cloud on a 15-minute delayed basis. Chart price data is provided by TradingView on a 15-minute delayed basis.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Trending Articles

Bond Yields Have Risen Well Above Stock Dividend Yields. Are They a Buy?
We're at the Tail End of a Classic Video Game Stock Bust
Is Gold Really the Right Place for Your Money?
How Companies Can Succeed in AI Winter: Jeff Kagan
Utility Investing Is a Steady, Buy-and-Hold Play. Just Not in This Market
Why Nuclear Energy Is Now Part of The Road to Renewables
Our Inflation Nightmare Will Flatline in Six Months
California Wants 100% Electric Vehicles By 2035. Will Its Energy Grid Be Ready?

Market Movers

Sponsored Financial Content