Over the past six months, Albany’s shares (currently trading at $65.39) have posted a disappointing 19.2% loss, well below the S&P 500’s 5.8% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Albany, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Albany Will Underperform?
Even with the cheaper entry price, we don't have much confidence in Albany. Here are three reasons why we avoid AIN and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Albany’s sales grew at a sluggish 3.7% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector. 
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Albany, its EPS declined by 7.7% annually over the last five years while its revenue grew by 3.7%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Free Cash Flow Margin Dropping
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.
As you can see below, Albany’s margin dropped by 8.5 percentage points over the last five years. Continued declines could signal it is in the middle of an investment cycle. Albany’s free cash flow margin for the trailing 12 months was 8.2%.
Final Judgment
Albany doesn’t pass our quality test. After the recent drawdown, the stock trades at 14.9× forward EV-to-EBITDA (or $65.39 per share). At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere. We’d recommend looking at the most dominant software business in the world.
Stocks We Would Buy Instead of Albany
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