Sometimes, all retail investors and traders need for a sound investment is a company that provides the kind of goods that can stand the test of time. The kind of company that delivers goods and services that will always be in demand. It could be products that help deliver food, water, shelter, or energy, or it could even be a company that services these products. Apogee Enterprises is a prime example: The company might not be the first one you think of when considering what to invest in, but after considering the facts, it may be well worth your investment.
What Does APOG Do?
Apogee Enterprises (APOG) is a glass and metal designer and developer responsible for delivering products and services for clients across the United States, Canada, and Brazil. Since its founding in 1949, Apogee has been highly sought-after for its high-quality glass and metal products, and that has been a constant for over 70 years now.
APOG is split into four unique segments to help better concentrate operations on specific industries:
- Architectural Framing Systems (AFS),
- Architectural Glass (AG),
- Architectural Services (AS), and
- Large-Scale Optical Technologies (LSO).
From glass and aluminum windows to storefronts to curtainwall systems, APOG prides itself on helping to better the aesthetics of businesses while also reducing energy consumption and protecting those inside the buildings themselves from the outdoor elements.
APOG has several subsidiaries, many of which might ring a bell for retail investors and traders: Names like Alumicor, Harmon, Tru Vue, and Wausau all fall under the APOG umbrella, and all are used as a part of its day-to-day operations. Together, APOG works to create glass and metal products that are both practical and aesthetically pleasing.
APOG Revenues and Earnings Forecasts
Talking about what APOG does is one thing, but actually looking at its revenues and earnings forecasts to see just how well it does it is something completely different.
Let’s begin by looking at its revenues.
Over the past four years, APOG has seen its gross profit rise and fall pretty predictably. It’s fascinating to track: APOG went from a total revenue of over $1.3 billion and a gross revenue of $333 million in 2018 to a total revenue of $1.4 billion and a gross revenue of $293 million in 2019.
That’s an increase in total revenue, but a drop in gross revenue. Then, in 2020 and 2021, total revenue dropped from $1.3 billion down to $1.2 billion and gross revenue dropped from $318 million to $275 million, respectively.
This increase and decrease of total and gross revenue is reflected in APOG’s earnings forecast. While some experts predict its price per share to rise from $40 to $48 over the next twelve months and some seem to think it will fall from $40 to $35 during the same amount of time, the consensus falls right down the middle: APOG’s price per share is likely to fall slightly over the next year, dipping down from $40 to $38 by this time next year.
APOG Profit Margins Are Down A Lot
This bit of information leads right into the potential risks of buying APOG stock: Its profit margins are down, and not insignificantly.
One year ago, Apogee Enterprises enjoyed a profit margin of 3.7%. Today, its profit margin is much lower, falling all the way down to 1.8% — That’s more than half of what it was just twelve months ago. This is not a good sign, and should be treated as a biggest risk facing the company’s share price today.
Beyond this, there’s also the fact that APOG is dealing with some large gains that are skewing its overall financial results. These one-off items are not characteristic or appropriate considering where APOG is at right now in terms of revenues and earnings forecasts, and this makes for a considerable risk for potential retail investors and traders currently looking to get a piece of APOG.
Is APOG Overvalued?
Looking at the risks associated with APOG and its tumultuous revenue and earnings forecast, it’s somewhat surprising to see the company’s market cap resting comfortably at $981 million, just shy of $1 billion.
Taking into account the consensus that APOG stock is going to drop in price over the next twelve months, it appears fully valued at this time based on a discounted cash flow analysis forecast.
The share price is likely to reflect its lofty valuation in the near term. This doesn’t mean APOG is at risk of going under or anything, just that its current financial health and profitability doesn’t match its valuation.
Long story short, APOG’s valuation doesn’t appear to be very fair at this point in time. It’s overvalued, but only ever so slightly.
Is APOG Stock A Buy? The Bottom Line
Taking into account what Apogee Enterprises does, what its revenue and earnings forecasts look like in the months to come, the risks associated with the stock, and its slight overvaluation, APOG stock is not a Buy as of late. While this very well could change at a moment’s notice, the current reality for APOG stock is to watch or hold, not to buy.
Not to mention, with the lumber bubble finally burst, there’s a real possibility that construction and renovation could start picking back up again soon. If this happens, then it wouldn’t be out of the ordinary to see APOG stock start climbing upward to match the increase in wood sales as a result of decreased prices.
This is all the more reason to keep eyes peeled and pay close attention to APOG’s future going forward. For now, though, APOG stock is definitively not a Buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.