ATS (TSX:ATS) stock has dropped about 25% this year and roughly 40% in only three months, while investors digest weaker revenue, softer orders, and disappointing earnings. I’m not pretending those problems don’t matter, but the market seems to be pricing in continued disappointment at a time when the company is actively reducing costs and positioning the business for better margins.
The first phase alone of its new transformation program is expected to eliminate millions in annual costs for ATS, and its management sees even more savings across the full initiative. Meanwhile, the company’s energy revenue remains strong, and its services segment continues to grow.
In this article, I’ll explain why ATS’s 40% drop has made me more interested in buying the stock and why its transformation plan could set up a much stronger long-term growth story.
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ATS stock after the selloff
In short, based in Cambridge, ATS provides automation solutions to customers across life sciences, food and beverage, industrial and consumer markets, and energy. After recent sharp declines, its shares currently trade at $28.35 each, giving the company a market cap of $2.8 billion.
That selloff in this growth stock becomes easier to understand after digging into ATS’s latest results. In the first quarter of fiscal 2027 (ended in June), the company’s revenue declined 5.8% year over year (YoY) to $693.7 million, mainly because of weaker organic revenue and a lower order backlog entering the quarter.
On the profitability side, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) fell 8.5% YoY to about $93 million. As a result, ATS’s adjusted earnings also dropped 14.6% from a year ago to $0.35 per share.
Meanwhile, its order activity also softened, with its order bookings dropping by 5.3% YoY to $656 million, while its order backlog fell 8.7% to about $1.9 billion. The company pointed to delays in some expected customer awards, while lower GLP-1-related demand also weighed on parts of the business.
Why I’m buying the dip
Clearly, those numbers are not pretty. But this is where the appeal of this beaten-down growth stock gets interesting. Following a broad review of its operations, ATS recently launched an 18-month Fixed Cost Transformation Program. The first phase of the program will focus on Europe, where the company plans to consolidate certain facilities and transfer select capabilities to other ATS locations that could serve customers more efficiently.
That initial phase is expected to reduce annual costs by about $20 million and represents roughly 30% of the savings opportunity it sees across the broader program. More importantly, ATS believes the full transformation could deliver about half of the margin expansion needed to reach its long-term adjusted earnings from operations margin target of 15%.
Moreover, the company’s energy revenue surged nearly 69% YoY in the first quarter to $59.8 million, helped by the execution of nuclear projects. Similarly, ATS’s services revenue also climbed 11.4% to about $183 million.
Why do I find this beaten-down growth stock attractive to buy?
Beyond its cost-cutting initiatives, ATS continues to target long-term opportunities in nuclear refurbishment, small modular reactors, radiopharmaceuticals, data centre infrastructure, and warehouse packaging automation. The company is also working to increase recurring revenue and improve capital efficiency across its portfolio.
Taken together, these efforts and fundamentals are why I find the 40% drop in ATS stock attractive rather than frightening. While near-term execution risks remain, the firm is cutting costs while maintaining exposure to markets with promising long-term demand. If bookings improve and the transformation program lifts margins as intended, today’s depressed ATS stock price could prove to be a solid entry point for patient growth investors.
