Apogee (APOG)

Architectural products company Apogee (NASDAQ:APOG) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 4.6% year on year to $358.2 million. Its non-GAAP profit of $0.98 per share was 16.2% above analysts’ consensus estimates.

Company Overview

Involved in the design of the Apple Store on Fifth Avenue in New York City, Apogee (NASDAQ:APOG) sells architectural products and services such as high-performance glass for commercial buildings.

Commercial building products companies, which often serve more complicated projects, can supplement their core business with higher-margin installation and consulting services revenues. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of commercial construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of commercial building products companies.

Other companies in the architectural glass and building products industry include Tecnoglass (NYSE:TGLS) and private companies Oldcastle BuildingEvelope, Vitro Architectural Glass, and Guardian Glass.

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Apogee grew its sales at a sluggish 1.6% compounded annual growth rate. This was below our standards and is a rough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Apogee’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.3% annually.

This quarter, Apogee reported modest year-on-year revenue growth of 4.6% but beat Wall Street’s estimates by 2.1%.

Looking ahead, sell-side analysts expect revenue to grow 3% over the next 12 months. While this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

Apogee has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 24.5% gross margin over the last five years. Said differently, Apogee had to pay a chunky $75.46 to its suppliers for every $100 in revenue.

In Q3, Apogee produced a 23.1% gross profit margin, marking a 5.6 percentage point decrease from 28.7% in the same quarter last year. Apogee’s full-year margin has also been trending down over the past 12 months, decreasing by 4 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Apogee has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.8%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Apogee’s operating margin rose by 1.3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Apogee generated an operating margin profit margin of 7.5%, down 5.1 percentage points year on year. Since Apogee’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Apogee’s EPS grew at a remarkable 13.1% compounded annual growth rate over the last five years, higher than its 1.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Apogee’s earnings to better understand the drivers of its performance. As we mentioned earlier, Apogee’s operating margin declined this quarter but expanded by 1.3 percentage points over the last five years. Its share count also shrank by 18.6%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Apogee, its two-year annual EPS declines of 8.7% mark a reversal from its (seemingly) healthy five-year trend. We hope Apogee can return to earnings growth in the future.

In Q3, Apogee reported adjusted EPS of $0.98, down from $1.44 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 Apogee’s full-year EPS of $3.62 to grow 23.6%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Apogee has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.7% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Apogee’s margin dropped by 2.2 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Apogee’s free cash flow clocked in at $52.4 million in Q3, equivalent to a 14.6% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

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).

Although Apogee hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 16.8%, impressive for an industrials business.

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. Uneventfully, Apogee’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

Apogee reported $39.53 million of cash and $332.3 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 $170 million of EBITDA over the last 12 months, we view Apogee’s 1.7× net-debt-to-EBITDA ratio as safe. We also see its $4.93 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 Apogee blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 5.6% to $43.75 immediately after reporting.

Updated: December 4, 2025 at 10:30 PM EST

Are you wondering whether to buy Apogee or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Apogee falls short of our quality standards. First off, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its market-beating ROIC suggests it has been a well-managed company historically, the downside is its gross margins are lower than its industrials peers. On top of that, its cash profitability fell over the last five years.

Apogee’s P/E ratio based on the next 12 months is 9.5x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $52 on the company (compared to the current share price of $37.55).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.