Apple TV is intended to output audio in PCM when set to Auto format. This would be uncompressed PCM Multichannel though, so 5.1 or sometimes even 7.1 would be possible. PCM Multichannel is losslessly decoded from Dolby Digital 5.1/7.1 or AAC 5.1/7.1, so the exact same quality, and the best possible quality.
It works as designed.
There is a fallback setting to force Dolby Digital 5.1 if PCM is not supported, but that also disables Dolby Atmos. If your audio system supports Dolby Atmos in Dolby MAT format from Apple TV 4K, then it must also support PCM Multichannel.