Atkore Inc. (ATKR): A Bull Case Theory

Atkore Inc. (ATKR) has been on a rollercoaster ride in recent months, with its share price plummeting by 63% from its all-time high in less than a year. This decline has been driven by a disappointing earnings call, where management lowered estimates and projected prolonged headwinds. However, despite the stock's struggles, there are several compelling reasons to believe that Atkore remains a fundamentally strong company with significant long-term growth potential.



Firstly, Atkore boasts an impressive average return on capital employed (ROCE) of 27.8% and return on invested capital (ROIC) of 28.3% since 2016. These high returns indicate that the company is effectively utilizing its capital to generate profits, suggesting strong long-term growth potential. In comparison, the average ROCE for its peers in the electrical equipment industry is around 15-20%.

Moreover, Atkore trades at just 2.8x its peak trailing twelve-month free cash flow (TTM FCF), which is significantly lower than its historical average and the industry average. This low valuation suggests that the company is undervalued and has the potential for significant growth in the future.



Another key factor driving Atkore's long-term growth potential is its strategic focus on water and global construction services. As major tech companies invest in data centers and cloud infrastructure, there is a growing demand for Atkore's products, such as electrical conduit and cable management systems. By focusing on these emerging markets, Atkore can capitalize on the strong demand for its offerings.

Additionally, Atkore's commitment to sustainability and innovation in its products and services can help it attract environmentally conscious customers and stay ahead of competitors. The company's 2024 Sustainability Report highlights progress towards its 2025 goals, demonstrating its dedication to responsible business practices.



Furthermore, Atkore's earnings have grown by 30% annually over the past five years, demonstrating the company's ability to generate profits and reinvest them effectively, driving long-term growth. The company's conservative dividend payout ratio of just 12% of its profit and 14% of its free cash flow indicates that it is reinvesting a significant portion of its earnings back into the business, which can drive long-term growth.

In conclusion, despite the recent decline in Atkore's share price, the company remains fundamentally strong, with a strong track record of utilizing capital to generate profits, a low valuation, and a strategic focus on emerging markets and sustainability. As the company continues to execute on its growth initiatives and capitalize on emerging market trends and opportunities, it is well-positioned to drive long-term growth and shareholder value. While the timeline for the reversal of pricing pressures is uncertain, a recovery in pricing would likely lead to improved earnings and an increase in Atkore's stock price. As such, Atkore Inc. (ATKR) presents a compelling investment opportunity for those looking to capitalize on the company's long-term growth potential.