Alliant Techsystems Inc. (ATK) Stock Could Underperform for Years

…and you’ll underdeliver
When I look at ATK as-is, I see a stock selling for 11.7 times earnings, 9.5 times free cash flow, and growing earnings at less than 4% annually (projected). The stock doesn’t look particularly cheap to me. But even if you disagree, and think a P/E in the low-teens means ATK is “cheap,” then that argues in favor of management using what little cash it has, to buy back its own stock — not run around paying 32 times earnings for new subsidiaries.

If you ask me, mistakes of the magnitude that ATK’s been making lately — remember, this is 40% of the company’s own market cap being spent on acquisitions, so nearly a wholesale remaking of the company — will be the undoing of ATK. I think as the full implication of these too-pricey purchases become clear, they’ll weigh down the stock for years.

And… I’m staking my reputation on this prediction. Although I’m not short Alliant Techsystems Inc. (NYSE:ATK) stock presently (indeed, per Fool disclosure rules, I cannot sell the company short for at least three days after this article runs), I will publicly rate ATK stock an underperform on the Motley Fool CAPS stock ratings service. Think I’m wrong?

The article ATK Stock Could Underperform for Years originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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