Celestica (TSX:CLS) stock on the TSX has been on a stellar run in recent years, and it’s no mystery why. The company has smartly positioned itself at the intersection of growing industries like cloud, advanced computing, and 5G and is riding these waves with solid execution.
Its ability to pivot towards high-margin segments, combined with a strong focus on operational efficiency, has made investors happy. Plus, it’s been steadily returning value through buybacks and dividends, making the stock an attractive option. All this has turned Celestica into a bit of a hidden gem in the tech manufacturing space! But is it still worth it?
On the rise
Celestica stock has been a bit of a dark horse, quietly gaining momentum and making savvy investors look pretty smart. Over the last few years, the company has shown it’s more than just another tech manufacturer. By focusing on high-growth areas like cloud computing, advanced electronics, and 5G, Celestica has positioned itself right in the sweet spot of several booming industries. It’s also tightened up operations, cutting costs where it makes sense and boosting margins, which Wall Street and Bay Street both love to see.
But it’s not just about riding industry trends. Celestica worked to keep its shareholders happy. The company’s commitment to returning value through share buybacks and dividends has made it even more attractive. On top of that, its knack for consistently beating earnings expectations has turned heads. All this success has turned Celestica from a quiet player into one of the TSX’s tech darlings.
Into earnings
Celestica’s second-quarter (Q2) 2024 results came in hot, surpassing the high end of their guidance for both revenue and non-IFRS (International Financial Reporting Standards) adjusted earnings per share (EPS). It reported a strong 23% year-over-year revenue growth, hitting $2.39 billion and an impressive 65% increase in non-IFRS adjusted EPS to $0.91. The Connectivity & Cloud Solutions (CCS) segment was the star, with a 51% revenue jump, while the Advanced Technology Solutions (ATS) segment saw a slight dip. The overall operating margin also improved to 6.3%, up from 5.5% in the previous year. Celestica’s robust performance has given them the confidence to raise their full-year outlook for 2024. Now, the company expects $9.45 billion in revenue and a non-IFRS adjusted EPS of $3.62.
Looking ahead, Celestica stock is riding this wave of momentum into Q3 and beyond. For Q3 2024, it’s guiding revenue between $2.325 billion and $2.475 billion, with a non-IFRS adjusted EPS range of $0.86 to $0.96. Despite some expected impacts from stock-based compensation and other expenses, the company’s strong operational execution and favourable demand trends have them well-positioned to continue delivering solid results. Its updated full-year outlook suggests they’re on track for a banner year. With projected growth of 19% in revenue and 49% in non-IFRS adjusted EPS compared to 2023.
Offering value
Celestica’s stock certainly has some intriguing aspects that could catch the eye of potential investors. With a trailing price-to-earnings (P/E) ratio of 16.64 and a forward P/E of 13.77, the stock is trading at a reasonable valuation relative to its earnings, especially considering the company’s impressive recent performance. The stock has also seen significant growth over the past year, boasting a 113.77% increase in its 52-week change.
However, it’s worth noting that Celestica doesn’t pay a dividend, which might be a downside for income-focused investors. The company also has a relatively high beta of 2.25, indicating that the stock is more volatile than the market, so it could be a bit of a rollercoaster ride. Plus, with a price-to-book ratio of 3.35, the stock is not exactly cheap when compared to its book value.
On the plus side, with a strong return on equity of nearly 21% and healthy cash flows, Celestica appears to be managing its resources effectively. This could justify the premium investors are willing to pay. So, how much would you have made from $10,000 in 2014? Today, that would be worth $54,414.10! And even today, that could be headed for more. All in all, for those who can handle a bit of volatility and are looking for growth, Celestica stock might just be a valuable addition to the portfolio.
