Investing in stocks that are trading at their 52-week lows can present both opportunities and risks. Historically, about 15-20% of stocks that hit their 52-week lows on the TSX experience a significant rebound. In fact, returns average around 10-15% within the following six months, particularly if the stock’s decline was due to temporary factors or market overreactions.
However, it’s important to note that not all stocks recover. Some may continue to decline, especially if the underlying issues are fundamental rather than market-driven. This makes thorough research and analysis critical when considering investments in stocks at their 52-week lows. And we have one to consider right away!
ATS
Canadian investors, now might be the perfect time to take a closer look at ATS (TSX: ATS) as it trades near its 52-week lows. While some might see the recent dip as a cause for concern, savvy investors could view this as an opportunity to pick up a strong industrial automation company at a discount. Let’s dive into why ATS stock is worth considering, especially when it’s trading at such an attractive price point.
ATS has seen a significant decline in its stock price certainly, down 34.42% over the past year. This has brought it close to its 52-week low of $36.27. For a company with a market cap of $3.57 billion and a trailing price-to-earnings ratio of 20.09, this kind of dip might just be the buying opportunity that long-term investors are looking for.
Plus, with a forward P/E of 17.15, the stock appears to be reasonably priced for its future earnings potential, especially in an industry that’s poised for growth as automation and smart manufacturing continue to gain traction globally.
Earnings
The company’s recent earnings report does show some challenges, with quarterly revenue declining by 7.9% year over year and a notable 25.8% drop in quarterly earnings growth. However, despite these setbacks, ATS managed to generate $2.97 billion in revenue over the past year. Plus, it maintains a profit margin of 6.10%. These numbers suggest that ATS is still a solid performer with the potential to rebound as market conditions improve and as demand for automation solutions grows.
In fact, ATS’s balance sheet is another reason to consider this stock. The company holds $185.09 million in cash. This provides a cushion during turbulent times. And its current ratio of 1.79 indicates that ATS can comfortably meet its short-term obligations. While the debt-to-equity ratio of 84.69% may seem high, it’s important to remember that companies in the industrial sector often carry more debt to fund expansion and innovation. The fact that ATS has managed to maintain a return on equity of 11.30% suggests that the company is using its resources effectively to generate value for shareholders.
Returns over dividends
One thing to keep in mind is that ATS does not currently pay a dividend. So, this stock may not appeal to income-focused investors. However, for those looking for growth and value, ATS’s price-to-book (P/B) ratio of 2.12 and enterprise value/earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of 10.70 suggest that the stock is reasonably valued, especially compared to its peers. The fact that 95.38% of the shares are held by institutions further reinforces the notion that ATS is seen as a strong player in the industrial automation space!
So, while ATS is facing some short-term headwinds, its current valuation and position in the growing automation industry make it an appealing option, especially for Canadian investors looking to capitalize on a potential rebound. With its stock trading near 52-week lows, now could be an excellent time to consider adding ATS to your portfolio, especially if you believe in the long-term growth prospects of automation and smart manufacturing.
