"Boring" Company With 90% Upside

“The perfect stock would be attached to the perfect company, and the perfect company has to be engaged in a perfectly simple business, and the perfectly simple business ought to have a perfectly boring name.” — Peter Lynch

The recent NVIDIA earnings showed to the world how big is the new datacenter business has become due to artificial intelligence. The demands of modern computing workloads are completely different than what the current datacenter infrastructure provides, and that means massive spending in upgrades and new datacenter builds are only going to increase in the next 3-5 years.

The trend of GPU acceleration in datacenters and its applications in artificial intelligence and high-performance computing isn't limited to NVIDIA. There are other less known and less hyped up companies that can benefit from this trend. We mentioned SMCI in a previous video and today I want to show you another one that is way more under the radar than SMCI. 

Our boring company is called Atkore. It's based out of Harvey, IL and it has been around since the late 1950's. Despite the simple name and Midwest location, we are talking about a global manufacturer with facilities all over the world.  

Atkore focuses on electrical, safety, and infrastructure products like electrical conduit and fittings, cable and cable Management systems, infrastructure products, and safety and security products. Their client are mostly electric power providers, data centers and infrastructure companies. 

These guys make almost every single building block of everything that comprises data centers and the new demand surge is going to skyrocket their "boring" business.

They did $3.7 billion is sales last year, compared to $1.8 billion just 3 years ago, the net income is almost $800 million, which means almost 30% operating margin and a 20.93% net margin. 

It's trading at Price to Sales of 1.5 and PE of 7 which is insane considering the upcoming demand surge its going to see in the next 3 years. 

According to my DCF, which assumed a 10% annual growth for the next 5 years and a 12% discount rate, this is a $270 stock. It's currently trading at $142 and this means it has 90% of upside as of August 2023. 

A slow DCA into this stock over the next couple of years is something worth considering but do your own research first and make your own decisions. 

Disclaimer

The content provided in this article is for informational purposes only and should not be interpreted as financial, tax, legal, or investment advice. It's important to note that the information discussed here does not substitute for professional consultation with experts in the respective fields. This article does not constitute an invitation or solicitation to invest in any particular security.