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Apogee (APOG) Looks a Solid Bet: Add to Your Portfolio Now

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Apogee Enterprises, Inc. (APOG - Free Report) continues to benefit from strong order activity, continued momentum in  commercial construction markets and lower tax rates. Its focus on the integration of EFCO and the Sotawall acquisitions also bode well. Further, the company’s long-term earnings growth rate of 10% makes us confident of its inherent strength.

Let’s delve deeper and find out what’s fueling this stock.

Growth Drivers

Apogee raised its operating margin guidance to 8.9-9.4% for fiscal 2019, backed by solid backlog growth and order activity, as well positive outlook for the North American construction industry. The company believes the North American commercial construction markets will grow throughout fiscal 2020, as market activity continues to reflect solid growth across all U.S. regions and sectors, in particular, office and institutional building segments. Further, office employment and office vacancy rates, and job growth exhibit positive momentum, which confirms the favorable trend in the non-residential construction market.

Regarding acquisitions, Apogee is primarily focusing on the integration of EFCO to recognize margin opportunities. The company is moving forward with synergy goals by leveraging supplier relationships and driving on-time delivery. The company has ordered machining automation equipment and approved a plant improvement project to drive significant operational efficiency, beginning early in fiscal 2020. The company remains optimistic about long-term prospects for this business. Further, it expects robust award activity from the Sotawall acquisition, which bodes well for fiscal 2019 and beyond.

Moreover, the company will gain from lower tax rate as it maintained its tax-rate guidance of approximately 24% for fiscal 2019 compared with around 33% in fiscal 2018, reflecting benefits from the Tax Cuts and Jobs Act in the United States.

Other factors that make Apogee a favorable investment option include:

Solid Zacks Rank, Score Combination

Apogee carries a Zacks Rank #2 (Buy), at present. It has a VGM score of B. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1(Strong Buy) or 2, make solid investment choices.

Price Performance

Apogee’s shares have outperformed the industry over the past year. The stock has gained 3% as against the 20% loss recorded by the industry.



Return on Assets (ROA)

Apogee currently has a ROA of 7.3%, while the industry's ROA is 4.5%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.

Stock Seems Undervalued

Apogee has a trailing 12-month price earnings (P/E) ratio of 15.8, lower than the industry’s average trailing 12-month P/E ratio of 8.1. Based on this, the stock seems undervalued.

Other Stocks to Consider

Some other top-ranked stocks in the sector include W.W. Grainger, Inc. (GWW - Free Report) , Actuant Corporation and Atkore International Group Inc. (ATKR - Free Report) . All three stocks flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Grainger has a long-term earnings growth rate of 12.5%. Its shares have appreciated 119%, over the past year.

Actuant has a long-term earnings growth rate of 15.6%. The company’s shares have gained 24% during the same time frame.

Atkore International has a long-term earnings growth rate of 10%. The stock has rallied 63% in a year’s time.

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