Celestica Inc. (TSE:CLS), which is in the electronic business, and is based in Canada, received a lot of attention from a substantial price increase on the TSX over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Celestica’s outlook and valuation to see if the opportunity still exists.
Is Celestica still cheap?
According to my valuation model, Celestica seems to be fairly priced at around 12.37% above my intrinsic value, which means if you buy Celestica today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is CA$9.27, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, Celestica’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Celestica look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Celestica, at least in the near future.
What this means for you:
Are you a shareholder? CLS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CLS for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CLS should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Celestica. You can find everything you need to know about Celestica in the latest infographic research report. If you are no longer interested in Celestica, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.