The past six months have been a windfall for Allient’s shareholders. The company’s stock price has jumped 96.5%, setting a new 52-week high of $118.38 per share. This was partly thanks 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’re passing on Allient for now. Here are three reasons why ALNT doesn’t excite us, plus one stock we’d rather own.
1. Revenue Growth Flatlining
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Allient’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
2. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Allient has shown weak cash profitability relative to peers over the last five years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 4.5%, below what we’d expect for an industrials business.
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 7.8%, 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 quality test. Following the recent surge, the stock trades at 37.8× forward P/E (or $118.38 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at one of our top software and edge computing picks.
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