What a fantastic six months it’s been for Allient. Shares of the company have skyrocketed 47.2%, hitting $68.56. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy Allient, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Allient Not Exciting?
Despite the momentum, we don't have much confidence in Allient. Here are three reasons you should be careful with ALNT and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Allient’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 3.2% over the last two years. 
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 Allient, its EPS declined by more than its revenue over the last two years, dropping 5.7%. 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? Enter ROIC, a metric showing how much operating profit a company generates relative 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 8.1%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Allient isn’t a terrible business, but it doesn’t pass our bar. Following the recent rally, the stock trades at 28.3× forward P/E (or $68.56 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. We’d recommend looking at our favorite semiconductor picks and shovels play.
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