On Tuesday, July 21, Allegheny Technologies (NYSE:ATI) reported a big earnings miss, sending the shares down 14% in a day. On Wednesday, a downgrade by Deutsche Bank sliced a further 5% off the titanium metals maker.
And then the buying frenzy began.
In rapid-fire disclosures on SEC Forms 4, first Allegheny CEO Richard Harshman, then his CFO Patrick Decourcy, and finally his Senior Vice President Kevin Kramer reported buying 20,000, 2,350, and 2,000 shares respectively, and at prices ranging from $20.75 per share all the way up to $21.59.
It’s enough to get an investor wondering: Is there a reason all the executives at Allegheny are suddenly so eager to buy their own stock?
What does it mean to you?
Actually, maybe there is. Granted, Allegheny shares have lost nearly half their value over the past year, so the trend on this stock is pretty negative. Granted, too, after reporting a big loss this week, Allegheny Technologies is not sporting a particularly attractive P/E ratio — at least not based on trailing earnings. (In fact, at 85.3, the P/E looks decidedly un-attractive).
But look out a little further, and the numbers start to improve.
Based on consensus estimates, analysts expect Allegheny to earn enough profit next year to push its forward P/E ratio all the way down to 13.2. Given that these same analysts see 15% annualized earnings growth in Allegheny’s future, that’s a pretty attractive-looking valuation.
Given that Allegheny’s generous dividend yield will pay you 2.9% annually to patiently wait around for earnings to improve, the case for following management’s lead and loading up on Allegheny Technologies stock looks even better.
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