Over the past six months, Albany’s shares (currently trading at $69.10) have posted a disappointing 17.3% loss while the S&P 500 was flat. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Albany, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Albany Will Underperform?
Even with the cheaper entry price, we don't have much confidence in Albany. Here are three reasons why AIN doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Albany’s sales grew at a sluggish 3% compounded annual growth rate over the last five years. This was below our standard for the industrials sector. 
2. Shrinking Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
Analyzing the trend in its profitability, Albany’s operating margin decreased by 9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 10%.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Albany, its EPS declined by 5.6% annually over the last five years while its revenue grew by 3%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
We see the value of companies helping their customers, but in the case of Albany, we’re out. After the recent drawdown, the stock trades at 11.1× forward EV-to-EBITDA (or $69.10 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. We’d suggest looking at the most entrenched endpoint security platform on the market.
Stocks We Like More Than Albany
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
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