Allient (ALNT)

Precision motion systems specialist Allient (NASDAQ:ALNT) reported Q1 CY2025 results topping the market’s revenue expectations, but sales fell by 9.5% year on year to $132.8 million. Its non-GAAP profit of $0.46 per share was 35.3% above analysts’ consensus estimates.

Company Overview

Founded in 1962, Allient (NASDAQ:ALNT) develops and manufactures precision and specialty-controlled motion components and systems.

Like many equipment and component manufacturers, electronic components companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include data centers and telecommunications, which can benefit companies whose optical and transceiver offerings fit those markets. But like the broader industrials sector, these companies are also at the whim of economic cycles. Consumer spending, for example, can greatly impact these companies’ volumes.

Competitors of Allient Inc. (NASDAQ: ALNT) include Altra Industrial Motion Corp. (NASDAQ: AIMC), Regal Rexnord Corporation (NYSE: RRX), and Ametek Inc. (NYSE: AME).

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Allient’s sales grew at a mediocre 6.9% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Allient’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.7% annually. Allient isn’t alone in its struggles as the Electronic Components industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

This quarter, Allient’s revenue fell by 9.5% year on year to $132.8 million but beat Wall Street’s estimates by 5.7%.

Looking ahead, sell-side analysts expect revenue to grow 3.7% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

Allient’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 31% gross margin over the last five years. Said differently, Allient paid its suppliers $69.00 for every $100 in revenue.

In Q1, Allient produced a 32.2% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Allient was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.6% was weak for an industrials business.

Looking at the trend in its profitability, Allient’s operating margin decreased by 1.2 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. Allient’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Allient generated an operating profit margin of 6.6%, down 1.8 percentage points year on year. Since Allient’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Allient’s EPS grew at a weak 3.6% compounded annual growth rate over the last five years, lower than its 6.9% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Allient’s earnings to better understand the drivers of its performance. As we mentioned earlier, Allient’s operating margin declined by 1.2 percentage points over the last five years. Its share count also grew by 16.6%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Allient, its two-year annual EPS declines of 16% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Allient reported EPS at $0.46, down from $0.58 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Allient’s full-year EPS of $1.37 to grow 39.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Allient has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.1%, subpar for an industrials business.

Taking a step back, an encouraging sign is that Allient’s margin expanded by 1.5 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Allient’s free cash flow clocked in at $12.87 million in Q1, equivalent to a 9.7% margin. This result was good as its margin was 5.5 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Allient historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.8%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Allient’s ROIC averaged 1.3 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Allient reported $47.75 million of cash and $241.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $47.84 million of EBITDA over the last 12 months, we view Allient’s 4.0× net-debt-to-EBITDA ratio as safe. We also see its $6.27 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Allient blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. Zooming out, we think this quarter featured some important positives. Shares traded up 1.7% to $22.12 immediately after reporting.

Updated: May 22, 2025 at 10:58 PM EDT

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Allient, you should also grasp the company’s longer-term business quality and valuation.

Allient doesn’t pass our quality test. To begin with, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Allient’s P/E ratio based on the next 12 months is 16x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $34 on the company (compared to the current share price of $30.44).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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