Celestica (TSX: CLS) has been on a tear lately, and its latest earnings report only added fuel to the fire. After delivering better-than-expected second-quarter results, shares jumped more than 16%, pushing the stock even higher in what has already been a phenomenal year for the company. But with the stock now trading at higher valuation levels, should investors still buy this stock? Let’s take a closer look.
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Celestica is delivering solid growth
The Canadian company is benefitting from the artificial intelligence (AI) boom, particularly in its Connectivity and Cloud Solutions (CCS) segment. Celestica, known for its expertise in design, manufacturing, and hardware platform and supply chain solutions, has been focusing on high-growth, high-margin businesses. One area that’s getting a lot of traction is its Hardware Platform Solutions (HPS) business, a key growth engine within its CCS division.
In the second quarter, Celestica reported revenue of $2.89 billion, a 21% year-over-year increase. Profitability metrics also remained strong. The company’s adjusted operating margin improved to 7.4%, up from 6.3% a year ago, and adjusted earnings per share (EPS) surged 54% to $1.39. These solid numbers justify the strong post-earnings rally.
A major contributor to this performance was the HPS business, which generated $1.2 billion in revenue in the second quarter (Q2), up 82% year over year. This segment alone accounted for 43% of Celestica’s total sales, highlighting its growing importance.
The company’s Advanced Technology Solutions (ATS) segment, which includes Aerospace and Defence, Industrial, HealthTech, and Capital Equipment businesses, also experienced growth. ATS brought in $819 million in revenue for the quarter, a 7% increase from the previous year. This improvement in the ATS segment was driven by robust demand in the capital equipment space and a recovery in the industrial sector.
Here’s what Celestica’s valuation indicates
This latest jump adds to what has been a staggering multi-year climb for the stock. Celestica has more than doubled in 2025 alone, and over the past three years, it’s gained a jaw-dropping 1,817%. Such momentum naturally raises concerns about valuation, and, indeed, the stock isn’t exactly cheap anymore.
Celestica currently trades at a next 12-month price-to-earnings (P/E) ratio of 32.1 — above average for the sector.
However, when you factor in the company’s projected earnings growth of 39% in 2025, the premium doesn’t seem excessive. Its forward price-to-sales (P/S) ratio of 1.8 also remains relatively reasonable, especially for a company operating in a high-demand space with solid execution and expanding margins.
This indicates that Celestica stock has more room to run.
Is Celestica stock a buy?
Celestica is poised for significant growth, driven by the strong momentum in its HPS business. Demand from hyperscaler customers remains robust, as these customers continue to invest in expanding and upgrading their data centre infrastructure. This ongoing investment will translate into sustained demand for Celestica’s advanced networking products.
In particular, the company’s communications end market is expected to be a key growth engine. Celestica is actively ramping up several 800G networking programs, while demand for its 400G products remains solid.
Further, Celestica is also benefiting from a more profitable mix of business, with HPS becoming a larger share of revenue. Combined with gains in productivity, this positions Celestica to deliver meaningful improvement to its bottom line.
With strong growth prospects, improving profitability, and a valuation that remains within reasonable bounds, Celestica is a compelling investment.
