With a remarkable 94% increase in its share prices so far in 2024, Celestica (TSX: CLS) stock is continuing to be the top-performing TSX stock this year. CLS stock’s outstanding performance is mainly supported by its ability to maintain solid financial growth trends even amid the ongoing macroeconomic challenges and inflationary pressures that make it stand out in the Canadian stock market.
But are you wondering if Celestica stock is still a good buy today, even after such a massive rally? I believe the answer is yes, and here are three main fundamental reasons why.
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Celestica stock continues to post solid financial growth
In 2023, the Toronto-headquartered company posted a 9.8% YoY (year-over-year) rise in its total revenue to US$8 billion, beating Street analyst expectations of $7.9 billion. Celestica stock generated nearly 58% of its total revenue from its connectivity & cloud solutions (CCS) operations during the year, while the remaining came from its advanced technological solutions (ATS) segment.
Even as most businesses globally continue to face the heat of inflationary pressures and slowing global economic growth, Celestica stock’s 2023 adjusted earnings grew positively, even at a higher pace than its revenue-growth rate. Its adjusted annual earnings stood at $2.43 per share, up 27.9% YoY and beating Bay Street analysts’ expectations of $2.36 per share.
In the first quarter of 2024, Celestica stock’s financial growth trend improved further as it posted an 83% YoY increase in its adjusted earnings to $0.86 per share with the help of only a 20.2% increase in its quarterly revenue.
Improving profitability
If a business is not profitable, it may not sustain itself in the long run and may face big financial difficulties despite having high revenue growth. And Celestica stock might not disappoint you in this regard. Last year, the company’s adjusted net profit margin expanded to 3.7% from 3.2% a year ago, reflecting its ability to control its costs.
Celestica stock’s adjusted net profit margin expanded further in the first quarter of the ongoing year to 4.6%. Although its ATS segment’s operating margin during the quarter improved moderately to 4.7% from 4.4% a year ago, the company’s CCS segment’s margin jumped significantly to 7% from just 5.8%. This continued margin expansion across both segments highlights Celestica’s strategic focus on high-growth areas and effectively managing operations, further brightening its long-term growth prospects.
Solid growth outlook and focus on strategic acquisitions
Building on its strong first-quarter financial performance, Celestica recently raised its full-year 2024 outlook, showcasing the management’s confidence in its growth trajectory. The company now expects to post annual revenue of $9.1 billion, up from the previous forecast of $8.5 billion. This revised guidance was mainly driven by sustained demand across its segments and strategic investments that are also likely to boost its future earnings growth.
Besides that, Celestica’s strong financial base gives it the ability to make new quality acquisitions from time to time to improve its growth prospects. For example, it recently announced the strategic acquisition of an IT infrastructure and asset management company, NCS Global Services, which could help broaden Celestica’s service offerings and enable it to tap into new revenue streams.
Given all these positive factors, I find Celestica stock a screaming buy at the current price of $75.33 per share and a market cap of $8.9 billion, as it has the potential to continue soaring in the long run.
