We came across a bullish thesis on Atkore Inc. (ATKR) on Substack by Busy Investor Stock Reports. In this article, we will summarize the bulls’ thesis on ATKR. Atkore Inc. (ATKR)'s share was trading at $72.51 as of Feb 14^th. ATKR’s trailing and forward P/E were 6.98 and 11.53 respectively according to Yahoo Finance.

Atkore has experienced a significant downturn, with shares now down 63% from their all-time high in less than a year, following a disappointing earnings call where management lowered estimates and projected prolonged headwinds. This sharp decline presents a potential opportunity, as markets often overshoot in both directions. Despite the stock’s struggles, Atkore remains fundamentally strong, boasting an impressive average return on capital employed (ROCE) of 27.8% and return on invested capital (ROIC) of 28.3% since 2016. Additionally, the company trades at just 2.8x its peak trailing twelve-month free cash flow (TTM FCF), reinforcing the case that it will eventually recover to those levels, though the timing remains uncertain.

The primary driver of Atkore’s decline has been the seven-quarter streak of falling average selling prices, largely due to increased competition from imports. PVC from Colombia, the Dominican Republic, and China, along with steel pipe from Canada and Mexico, has been arriving in greater quantities, pushing prices lower through basic supply and demand dynamics. Consequently, the core focus of current research is evaluating when these price pressures will reverse. Early signs indicate that steel conduit may have already seen the worst of its year-over-year price declines, following cyclical patterns observed in 2008 and 2016. Similarly, PVC resin prices have flattened year-over-year but are now turning downward. Historically, once YoY PVC price declines exceed 10%, they tend to rebound aggressively, suggesting an impending recovery.

One of the most compelling tailwinds for Atkore is the massive infrastructure spending wave, particularly in data centers, cloud infrastructure, and AI, driven by major tech companies. While 2024 may not see explosive growth, demand for Atkore’s products will remain strong, positioning the company for a rebound. With these factors in play, Atkore appears to be a compelling investment at its currently depressed valuation.

Atkore Inc. (ATKR) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held ATKR at the end of the third quarter which was 37 in the previous quarter. While we acknowledge the risk and potential of ATKR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ATKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.