Shares of Allegheny Technologies (ATI) have been strong performers lately, with the stock up 38.5% over the past month. The stock hit a new 52-week high of $32.09 in the previous session. Allegheny Technologies has gained 96.4% since the start of the year compared to the -6.7% move for the Zacks Basic Materials sector and the 50.1% return for the Zacks Steel - Speciality industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 4, 2022, Allegheny Technologies reported EPS of $0.54 versus consensus estimate of $0.37 while it beat the consensus revenue estimate by 18.38%.
For the current fiscal year, Allegheny Technologies is expected to post earnings of $1.63 per share on $3.4 billion in revenues. This represents a 1153.85% change in EPS on a 21.26% change in revenues. For the next fiscal year, the company is expected to earn $1.97 per share on $3.73 billion in revenues. This represents a year-over-year change of 21.1% and 9.91%, respectively.
Allegheny Technologies may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Allegheny Technologies has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 19.2X current fiscal year EPS estimates, which is a premium to the peer industry average of 15.8X. On a trailing cash flow basis, the stock currently trades at 24.8X versus its peer group's average of 24.8X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Allegheny Technologies currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Allegheny Technologies meets the list of requirements. Thus, it seems as though Allegheny Technologies shares could still be poised for more gains ahead.
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