ATLN

We rate ATLANTIC INTERNATIONAL CORP. (ATLN) as a Reduce with a composite score of 47.2/100 at a current price of $3.25. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (60th percentile) and value (37th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (31th percentile) and stability (34th percentile) tempers our overall conviction. We assign a No Moat rating (14/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is widening, which provides additional comfort in the durability of the competitive position.

ATLANTIC INTERNATIONAL CORP. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.2/100 places it at rank #2458 in our full 7,333-stock universe. At $168M in market capitalization, ATLANTIC INTERNATIONAL CORP. is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 5% and favorable momentum (60th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 11% (-48.5pp vs sector) narrow to operating margins of -8% (-11.4pp vs sector) and net margins of -9.3%, yielding a gross-to-net conversion rate of -84%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $3.25, ATLANTIC INTERNATIONAL CORP. is trading at a premium to fundamental value. Our value factor score of 37/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at P/S of 0.5x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Medium uncertainty rating to ATLANTIC INTERNATIONAL CORP.. The stock presents a balanced risk profile: current negative profitability (net margin -9.3%) and below-average price stability (34th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: current negative profitability (net margin -9.3%); below-average price stability (34th percentile); low beta of 0.31 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 34th percentile and quality factor at the 36th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our medium uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate ATLANTIC INTERNATIONAL CORP.'s capital allocation as Poor. Key concerns include negative profitability, weak asset returns (ROA -35.7%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — ATLANTIC INTERNATIONAL CORP. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, ATLANTIC INTERNATIONAL CORP. receives a Reduce rating with a composite score of 47.2/100 (rank #2458 of 7,333). Our quantitative framework assigns a No Moat (14/100, trend: widening), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 40/100.

Our analysis does not support a constructive view on ATLANTIC INTERNATIONAL CORP. at this time. The combination of limited competitive advantages, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.