Celestica Inc (CLS, Financial) experienced a day's loss of -10.39% and a 3-month gain of 37.85%. With an Earnings Per Share (EPS) of 1.38, the key question is: Is Celestica significantly overvalued? In this article, we provide a thorough valuation analysis of Celestica to answer this question. Read on to understand the true value of this stock.
Introducing Celestica Inc (CLS, Financial)
As a provider of supply chain solutions, Celestica Inc (CLS) operates in two major segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). The company's stock price currently stands at $22.68, while the GF Value, an estimate of fair value, is $14.08. This discrepancy paves the way for an in-depth exploration of Celestica's intrinsic value, linking financial evaluation with key company information.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line gives an overview of the fair value at which the stock should ideally trade. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Celestica (CLS, Financial) appears to be significantly overvalued based on the GuruFocus Value calculation. With a market cap of $2.70 billion, the stock's future return is likely to be much lower than its future business growth due to its overvaluation.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Hence, it's crucial to review a company's financial strength before investing. Celestica's cash-to-debt ratio of 0.46 is worse than 74.95% of companies in the Hardware industry. However, its overall financial strength is ranked 6 out of 10 by GuruFocus, indicating fair financial health.
Profitability and Growth
Investing in profitable companies usually carries less risk. Celestica has been profitable for 10 years over the past decade. With revenues of $7.70 billion and Earnings Per Share (EPS) of $1.38 in the past 12 months, Celestica's profitability is ranked strong by GuruFocus. Moreover, its 3-year average annual revenue growth of 10.6% and EBITDA growth rate of 16.4% rank better than most companies in the Hardware industry, indicating robust growth.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) provides insight into its profitability. Celestica's ROIC of 10.64 is slightly lower than its WACC of 11.29 over the past 12 months.
Conclusion
In summary, Celestica (CLS, Financial) appears to be significantly overvalued. Despite this, the company's financial condition is fair, and its profitability is strong. Its growth also ranks better than most companies in the Hardware industry. For more information about Celestica stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
