Celestica and Air Canada are companies that are currently trading below what they’re actually worth. There’s a few ways you can value a company. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. Analysing the most recent financial data, I’ve created a list of companies that compare favourably in all criteria, making them potentially good investments.
Celestica Inc. (TSX:CLS)
Celestica Inc. provides design, manufacturing, hardware platform, and supply chain solutions in Canada and internationally. Started in 1996, and currently headed by CEO Robert Mionis, the company currently employs 23,400 people and has a market cap of CAD CA$1.79B, putting it in the small-cap stocks category.
CLS’s stock is now hovering at around -14% under its true level of $14.82, at a price tag of CA$12.70, based on my discounted cash flow model. signalling an opportunity to buy the stock at a low price. Additionally, CLS’s PE ratio stands at 13.71x against its its Electronic peer level of, 32.49x meaning that relative to other stocks in the industry, CLS’s stock can be bought at a cheaper price. CLS is also a financially healthy company, with short-term assets covering liabilities in the near future as well as in the long run.
More detail on Celestica here.
Air Canada (TSX:AC)
Air Canada provides domestic, U.S. transborder, and international airline services. Founded in 1937, and currently run by Calin Rovinescu, the company provides employment to 27,800 people and with the company’s market cap sitting at CAD CA$6.94B, it falls under the mid-cap group.
AC’s stock is currently hovering at around -75% below its real value of $103.3, at the market price of CA$25.36, based on my discounted cash flow model. This discrepancy signals a potential opportunity to buy AC shares at a low price. In addition to this, AC’s PE ratio is trading at around 3.4x compared to its Airlines peer level of, 6.29x indicating that relative to its comparable company group, AC can be bought at a cheaper price right now. AC is also robust in terms of financial health, with current assets covering liabilities in the near term and over the long run. Finally, its debt relative to equity is 181.09%, which has been diminishing over the past couple of years signifying AC’s ability to pay down its debt. Continue research on Air Canada here.
Magellan Aerospace Corporation (TSX:MAL)
Magellan Aerospace Corporation, through its subsidiaries, designs, engineers, and manufactures aero engine and aero structure components for aerospace markets in Canada, the United Sates, and Europe. Started in 1994, and now run by Phillip Underwood, the company currently employs 3,800 people and with the market cap of CAD CA$1.13B, it falls under the small-cap stocks category.
MAL’s shares are currently floating at around -53% less than its value of $41.11, at a price of CA$19.36, based on its expected future cash flows. This discrepancy gives us a chance to invest in MAL at a discount. Moreover, MAL’s PE ratio is around 10.13x relative to its Aerospace & Defense peer level of, 18.39x implying that relative to its comparable company group, MAL’s shares can be purchased for a lower price. MAL is also in great financial shape, with near-term assets able to cover upcoming and long-term liabilities. The stock’s debt-to-equity ratio of 12.52% has been diminishing over time, indicating its ability to reduce its debt obligations year on year. More detail on Magellan Aerospace here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.