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Does Celestica Offer a Good Value Buying Opportunity Now?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Celestica, Inc. (CLS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
P/E Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Celestica has a trailing twelve months PE ratio of 12.45, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.33. If we focus on the long-term PE trend, Celestica’s current PE level puts it below its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Electronics - Manufacturing Services industry’s trailing twelve months PE ratio, which stands at 17.20. At the very least, this indicates that the stock is highly undervalued right now, compared to its peers.
We should also point out that Celestica has a forward PE ratio (price relative to this year’s earnings) of 13.75, higher than the current level. Thus, it is fair to to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Celestica has a P/S ratio of about 0.34. This is lower than the S&P 500 average, which comes in at 3.08 right now. This is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Celestica currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Celestica a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Celestica is just 1.63, a level that is slightly lower than the industry average of 1.93. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, CLS is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Celestica might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘D’. This gives CLS a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
On the other hand, the current quarter consensus estimate has remained stable in the past two months, while the full year estimate moved down by 1.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Celestica is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a strong industry rank (Top 19% out of more than 250 industries) CLS looks like a strong value contender. In fact, over the past one year, the Zacks Electronics - Manufacturing Services industry has clearly outperformed the broader market, as you can see below:
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Does Celestica Offer a Good Value Buying Opportunity Now?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Celestica, Inc. (CLS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
P/E Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Celestica has a trailing twelve months PE ratio of 12.45, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.33. If we focus on the long-term PE trend, Celestica’s current PE level puts it below its midpoint over the past five years.
Further, the stock’s PE also compares favorably with the Zacks classified Electronics - Manufacturing Services industry’s trailing twelve months PE ratio, which stands at 17.20. At the very least, this indicates that the stock is highly undervalued right now, compared to its peers.
We should also point out that Celestica has a forward PE ratio (price relative to this year’s earnings) of 13.75, higher than the current level. Thus, it is fair to to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Celestica has a P/S ratio of about 0.34. This is lower than the S&P 500 average, which comes in at 3.08 right now. This is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Celestica currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Celestica a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Celestica is just 1.63, a level that is slightly lower than the industry average of 1.93. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, CLS is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Celestica might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘D’. This gives CLS a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
On the other hand, the current quarter consensus estimate has remained stable in the past two months, while the full year estimate moved down by 1.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Celestica, Inc. Price and Consensus
Celestica, Inc. Price and Consensus | Celestica, Inc. Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) despite strong value metrics and why we are looking for in-line performance from the company in the near term.
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Bottom Line
Celestica is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a strong industry rank (Top 19% out of more than 250 industries) CLS looks like a strong value contender. In fact, over the past one year, the Zacks Electronics - Manufacturing Services industry has clearly outperformed the broader market, as you can see below:
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>