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Are Investors Undervaluing Celestica (CLS) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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.

Celestica (CLS) is a stock many investors are watching right now. CLS is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 8.51 right now. For comparison, its industry sports an average P/E of 17.21. CLS's Forward P/E has been as high as 12.38 and as low as 3.61, with a median of 8.76, all within the past year.

Investors should also recognize that CLS has a P/B ratio of 0.76. The P/B ratio pits a stock's market value against 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. Over the past year, CLS's P/B has been as high as 0.85 and as low as 0.27, with a median of 0.66.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CLS has a P/S ratio of 0.19. This compares to its industry's average P/S of 0.33.

Finally, we should also recognize that CLS has a P/CF ratio of 5.78. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 6.35. Over the past 52 weeks, CLS's P/CF has been as high as 9.09 and as low as 1.77, with a median of 6.29.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Celestica is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CLS feels like a great value stock at the moment.


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