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Should Value Investors Buy Celestica (CLS) Stock?

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Zacks Equity Research
·3 min read
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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Celestica (CLS). CLS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 8.80. This compares to its industry's average Forward P/E of 15.71. Over the last 12 months, CLS's Forward P/E has been as high as 12.38 and as low as 5.09, with a median of 8.79.

Investors should also recognize that CLS has a P/B ratio of 0.81. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. CLS's current P/B looks attractive when compared to its industry's average P/B of 1.79. CLS's P/B has been as high as 0.85 and as low as 0.33, with a median of 0.70, over the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CLS has a P/S ratio of 0.19. This compares to its industry's average P/S of 0.39.

Finally, investors should note that CLS has a P/CF ratio of 6.13. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 6.35. CLS's P/CF has been as high as 9.09 and as low as 4.10, with a median of 6.29, all within the past year.

These are only a few of the key metrics included in Celestica's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, CLS looks like an impressive value stock at the moment.


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