ATI’s had a strong run – up 112% over the past year. Defence analysts like the story. Trump’s talking about a US$1.5 trillion defence budget, which would be good for a company supplying titanium to fighter jet manufacturers.
The business looks solid. The entry price doesn’t.
Last week I wrote about my 2026 strategy – targeting 15-25% returns in Consumer Discretionary, Industrials, and Health Care.
Each week I’ll look at one stock from these sectors. Some I’ll buy, some I’ll watch.
The Company
Stock: ATI (NYSE)
Current price: US$121.72 (as of Jan 29, 2026)
Price I’d consider: US$110-115
ATI manufactures specialty metals – titanium for jet engines, exotic alloys for nuclear submarines, materials used in F-35 production.
They’re a supplier to Boeing and Lockheed rather than an end manufacturer. The materials they produce need to perform under extreme conditions – high temperatures, deep ocean pressure, that sort of thing.
Revenue breakdown:
| Segment | 2024 | YTD 2025 | Growth Trend | What They Supply |
|---|---|---|---|---|
| Aerospace & Defense | 62% | 68% | Growing fast (+21% in Q3) | Jet engines, military aircraft, naval systems |
| Specialty Energy | 7% | 9% | Declining in 2025, expected to grow starting 2026 | Nuclear power plants, gas turbines for electricity |
| Medical | 5% | 3% | Declining | Surgical devices, implants |
| Electronics | 4% | 4% | Flat | Specialty applications |
| Industrial Markets | 22% | 16% | Declining | Oil & gas, automotive, construction |
Defence and aerospace revenue has been accelerating – from 66% in Q1 to 70% by Q3. Within that segment, defence revenue grew 51% year-on-year, jet engines 19%.
This is concentrated exposure to defence and aerospace. They don’t do consumer products or general infrastructure.
My Investment Thesis
Trump’s proposed defence budget would increase spending from US$901 billion to US$1.5 trillion – a 66% rise. Given ATI derives 68% of revenue from defence and aerospace, increased defence spending should benefit them directly. More F-35s and submarines means more demand for the titanium and specialty alloys ATI supplies.
The nuclear power angle is also worth noting. Microsoft’s signed a 20-year deal to restart Three Mile Island. Amazon bought a data centre with direct nuclear power. Google’s committed to small modular reactors by 2030.
The rationale is straightforward – AI requires substantial power, data centre electricity demand is projected to double by 2030, and nuclear provides baseload power that intermittent renewables can’t match.
ATI manufactures zirconium and hafnium alloys used in nuclear reactors. That said, nuclear-related sales were down in Q3 – this growth thesis is forward-looking rather than current reality. Management indicated growth should resume in Q4 and build through 2026.
This is a longer-term structural trend tied to AI infrastructure rather than just a four-year political cycle.
Commercial aerospace production is also recovering – airframe sales were up 58% year-on-year.
Analyst consensus expects 28% earnings growth in 2026, with operating margins expanding from current levels.
The growth case is sound. But valuation matters.
| Criteria | Assessment | Details |
|---|---|---|
| Financial Health | ✓ Strong | Revenue $1.13B (up 7%), profit $110M (10% margin), generates $444M cash annually. Debt is manageable. Real business making real money. |
| Valuation | ⚠️ Fair, not cheap | Stock trades at 39x profit (you pay $39 for every $1 the company earns). Up 112% in 12 months. Hit all-time high $127 on Jan 15. If stock drops to $110, potential upside improves from 18% to 32%. |
| Risk Management | What could go wrong | Profit margins drop from 20% back to historical 16-18%. Boeing delays slow airplane production. Defense budget lower than expected. Nuclear reactors take longer to build. Recession kills demand. Stock could drop 20% if growth slows. |
Financial Position
Q3 revenue came in at US$1.13 billion, up 7% year-on-year. Net profit was US$110 million, giving them a 10% net margin.
Free cash flow runs at about US$444 million annually – cash they can deploy for growth or return to shareholders.
Balance sheet is reasonable. Debt levels are manageable at under 2x EBITDA. They’re sitting on US$372 million in cash.
The company is profitable and generating cash. That’s a plus.
Valuation Concern
ATI trades at 39x trailing earnings – you’re paying US$39 for every dollar of annual profit.
For context, large defence contractors like Lockheed Martin trade at 60-70x. Specialty materials companies like Howmet and Carpenter Technology trade at 25-35x. ATI sits between the two at 39x.
The stock recently hit US$127 – an all-time high – after a 112% move over 12 months.
Wall Street bulls have price targets around US$145. From the current US$121.72, that’s 19% upside. If the stock pulled back 10% to US$110, the same target would offer 32% upside.
Same company, same thesis, materially better risk-reward by waiting for a more favourable entry.
Risk Factors
Worth considering what could go wrong:
Margin compression. Current operating margins are at 20% – above their historical 16-18% range. If margins revert to historical norms, profitability drops accordingly.
Boeing execution risk. Airframe sales are up 58%, but Boeing has a track record of production delays and quality issues. Any slowdown affects ATI’s revenue.
Defence budget uncertainty. The US$1.5 trillion proposal needs Congressional approval. Final appropriations could come in lower.
Nuclear timing. Small modular reactors are scheduled for 2028-2030, but nuclear projects historically run behind schedule. If deployment stretches to 2032-2035, the growth thesis gets pushed out several years.
Valuation compression. At 39x earnings, if growth disappoints or markets de-rate industrial multiples, the stock could easily trade down to 30x – roughly a 23% decline even with flat earnings.
Conclusion
ATI is a profitable, well-positioned company in a sector with decent tailwinds. But it’s not cheap at current levels.
I’d be interested around US$110-115 – roughly a 5-10% pullback from current prices. At that level, the risk-reward improves meaningfully.
ATI reports Q4 earnings on February 3, 2026.
Disclosure: This article represents the author’s personal investment research and opinions. It is not financial advice. Readers should conduct their own due diligence and consult with a qualified financial advisor before making investment decisions.