Allegheny Technologies Inc (ATI) Valuation

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Company Profile (obtained from Google Finance): Allegheny Technologies Incorporated (ATI) is a diversified specialty metals producer. The Company’s products include titanium and titanium alloys, nickel-based alloys and superalloys, zirconium, hafnium and niobium, stainless and specialty steel alloys, grain-oriented electrical steel, tungsten-based materials and cutting tools, carbon alloy impression die forgings, and large grey and ductile iron castings. ATI’s specialty metals are produced in a range of alloys and product forms. The Company focuses its technological and unsurpassed manufacturing capabilities to serve global end use markets with diversified and specialized product offerings. End use markets for its products include aerospace and defense, electrical energy, and medical. ATI operates in three segments: High Performance Metals Segment, Flat-Rolled Products Segment and Engineered Products Segment.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 4/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
4. Dividend Record – currently pays a dividend – PASS
5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

• Last Updated    11/30/2009
• MG Value    $151
• MG Opinion    Undervalued
• Value Based on 3% Growth    $57
• Value Based on 0% Growth    $33
• Market Implied Growth Rate    0.10%
• Net Current Asset Value (NCAV)    -$2.59
• PEmg    8.69
• Current Ratio    3.52
• PB Ratio    1.61

Key Data:

Balance Sheet – 9/30/2009

• Current Assets    $2,047,100,000
• Current Liabilities    $582,100,000
• Total Debt    $1,050,400,000
• Total Assets    $4,380,000,000
• Intangible Assets    $0
• Goodwill    $196,300,000
• Total Liabilities    $2,301,300,000
• Outstanding Shares    98,080,000

Earnings Per Share – Diluted

• 2009 (estimate)    -$0.07
• 2008    $5.67
• 2007    $7.26
• 2006    $5.61
• 2005    $3.61
• 2004    $0.22
• 2003    -$3.88
• 2002    -$0.82
• 2001    -$0.31
• 2000    $1.60
• 1999    $1.16

Earnings Per Share – Modern Graham

• 2009 (estimate)    $3.93
• 2008    $5.44
• 2007    $4.41
• 2006    $2.30
• 2005    $0.36
• 2004    -$1.06

Valuation History:

• 11/30/09 – Value $151, Actual Price $34.15, Undervalued & Defensive