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The Long Case For Celestica

Chris Safroniy profile picture
Chris Safroniy


  • Celestica is trading at lower multiples than its industry peers.
  • An increased focus on its diversified business, away from communications, merits a multiple expansion in the future.
  • Increased defense spending and changes to U.S. trade policies by the Trump administration are also positive catalysts.

52-Week High : $14.70

52-Week Low : $8.83

Last 12 months EPS : $1.21

Last 12 months revenue (in millions) : $6,133

Target Price : $17.36

Rationale :

Celestica (NYSE:CLS) is trading at lower multiples than its industry peers as a result of its higher concentration of revenue coming from communications, but with an increased focus on its diversified business, I foresee multiple expansion in the future.

Therefore, I used a sum-of-parts valuation, putting an EV/EBITDA multiple of 8x 2019E EBITDA for its diversified business and an EV/EBITDA multiple of 6x 2019E EBITDA for its traditional communications, servers, storage and consumer businesses.

Additionally, the market is overlooking its solid fundamentals and superior financial performance as well as its potential future growth opportunities resulting from increased defense spending and changes to U.S. trade policies by the Trump administration.

Relevant Comps

Benchmark Electronics Inc. (BHE)

Flex Ltd. (FLEX)

Hon Hai Precision (OTCPK:HNHAF) (HNHAY)

Industry Co. Ltd.

Jabil Circuit Inc. (JBL)

Plexus Corp. (PLXS)

Sanmina Corporation (SANM)


Catalysts for my investment thesis include increased global military spending, changes to U.S. trade policies by the Trump administration, future acquisitions and increased analyst coverage.

Thesis Introduction

I recommend buying Celestica, an innovative supply-chain services provider, and believe it is undervalued by up to 30%. The company is mispriced due to justifiable future multiple expansion as well as unrecognized growth potential. The market is overlooking its solid financial position and track record, discounting Celestica as a communications company relative to its peers and the company has low investor awareness due to limited sell-side coverage.

Additionally, investors do not realize Celestica's growth potential. In light of increased global defense spending and potential changes to U.S. trade policies, the company may exceed its growth expectations through organic growth or through acquisitions.

My price target is $17.36 based on

This article was written by

Chris Safroniy profile picture
Student. This author entered the 2017 Sohn Investment Idea Contest

Analyst’s Disclosure: I am/we are long CLS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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