The S&P/TSX Composite Index suffered another triple-digit decline on Thursday, May 4. The only sector that bucked the negative trend on the day was the S&P/TSX Capped Information Technology Index, which climbed 3.39%. Today, I want to zero in on one undervalued TSX stock that I’m looking to stack up over the course of this month. Celestica (TSX: CLS) is the stock I want to focus on today.
This cheap TSX stock has been punished in recent months…
Celestica is a Toronto-based company that provides supply chain solutions in North America, Europe, and Asia. Shares of this cheap TSX stock have dropped 11% month over month as of close on May 4. That has pushed the stock into negative territory in the year-to-date period. However, its shares are still up 4.6% year over year. Readers who want more information on Celestica’s recent performance can look at the interactive price chart below.
Here’s why I’m still excited about Celestica in early May 2023
Canada has established itself as a leading nation in the supply chain solutions space. Indeed, the Ottawa-based Kinaxis is one of the top supply chain management software companies on the planet. Grand View Research recently valued the global supply chain management market at US$21.1 billion. The report projects that this market will expand at a compound annual growth rate (CAGR) of 11% from 2023 through to 2030.
Fortune Business Insights also valued the global market for electronic manufacturing services at US$476 billion in 2021. The report projects that this market will grow from US$504 billion in 2022 to US$797 billion by 2029. That would represent a CAGR of 6.8% over the forecast period.
The COVID-19 pandemic led to severe disruptions for global supply chains. That led to shortages in some key products, including baby formula. Companies like Celestica will aim to mitigate these crises in the years and decades ahead.
This company released its first-quarter (Q1) fiscal 2023 earnings on April 26. In the first quarter, Celestica delivered revenue growth of 17% to $1.84 billion. Meanwhile, it posted adjusted earnings per share (EPS) of $0.47 — up from $0.39 per share in Q1 of fiscal 2022. Cash provided by operating activities rose to $72.3 million compared to $35.3 million in the previous year.
Should you snatch up this cheap TSX stock today?
Celestica also provided a 2023 outlook update in its Q1 earnings report. The company now projects total revenue of at least $7.6 billion — up from its previous projection of $7.5 billion. Management reiterated that it is very difficult to produce a confident outlook in this period of economic uncertainty.
What makes this TSX stock cheap in early May? The Relative Strength Index (RSI) measures the price momentum of a given equity. Shares of Celestica last had an RSI of 28, which puts this TSX in technically oversold territory. The stock possesses a very favourable price-to-earnings ratio of 8.7 at the time of this writing. I’m looking to stack shares of this TSX stock on the cheap before we close the book on the first week of May 2023.
