If I could only buy one Canadian stock this month, it would be ATS Corp (TSX: ATS).
ATS isn’t a household name like Shopify or Royal Bank. But after digging into its latest earnings call, I think this Cambridge, Ontario-based automation company is better positioned than most TSX stocks.
Here’s why I’m convinced.
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The bull case for this Canadian stock
ATS designs, builds, and services automated manufacturing systems for some of the world’s biggest companies. The company has been around since 1978 and employs more than 7,000 people across over 65 manufacturing facilities worldwide.
It offers services across multiple sectors such as life sciences, food and beverage, energy, consumer products, and transportation, providing diversification.
On the fiscal fourth quarter earnings call on May 28, 2026, CEO Doug Wright laid out a clear plan.
- ATS is stepping away from large-scale automotive work, a segment that has dragged on margins for years.
- Instead, it is redirecting that capacity toward higher-value niche applications.
- Interim CFO Anne Cybulski explained that this move removes about $50 million in what she called dilutive revenue, meaning sales that were not helping the bottom line anyway.
- The company took a $28.3 million charge in the quarter to close out those legacy projects.
I like this kind of discipline, which shows leadership is willing to walk away from revenue that does not build long-term value.
ATS ended fiscal 2026 with an order backlog of roughly $2 billion. Within that, the energy segment, which is mostly nuclear work, saw backlog jump about 40% year over year.
The company is involved in nuclear refurbishment, life extension programs, and new-build projects. It is also working with several small modular reactor developers on fuel systems and waste management, according to management.
ATS already has deep expertise in CANDU reactor technology, giving it a strong starting position most competitors cannot easily match. Life sciences still makes up 55% of ATS’s total backlog, and the company’s radiopharma business, which supports cancer treatment production, continues to gain momentum.
ATS also recently launched Flex Line, a new sterile pharmaceutical production platform aimed at helping drugmakers get products to market faster, the company said.
There is some near-term softness tied to GLP-1 weight-loss drug equipment orders, as the backlog normalizes after a huge surge last year.
But management said this reflects timing, not weaker long-term demand.
Is this Canadian stock undervalued?
For fiscal 2027, ATS expects margins to improve by 50 to 75 basis points compared with fiscal 2026, supported by the transportation cleanup and better operational discipline, Cybulski said. Longer term, the company is targeting a 15% adjusted operating margin.
The balance sheet also looks healthier, given net debt to adjusted earnings before interest, taxes, depreciation, and amortization fell to 2.8 times, marking four straight quarters of improvement. Working capital as a percentage of revenue also improved for a third straight quarter.
Putting it all together, I see a company trimming weak business lines, growing in nuclear and life sciences, and improving its financial footing. However, order bookings fell 18% in the quarter, and large-scale projects can create lumpy results from quarter to quarter.
But excluding transportation, ATS grew adjusted revenue and bookings at roughly a 12% compound annual rate over three years.
Analysts tracking the TSX stock forecast it to expand adjusted earnings per share from $1.47 in fiscal 2025 to $2.25 in fiscal 2028. If the Canadian stock is priced at 20 times forward earnings, in line with its 10-year average, it could deliver 20% returns over the next 12 months.
