ATS Corp (ATS, Financial) experienced a daily loss of 4.34%, with a 3-month loss of 3.87%. Its Earnings Per Share (EPS) stands at 1.09. The question that arises is whether the stock is fairly valued. This article provides an in-depth valuation analysis of ATS Corp (ATS). We encourage you to read on for a comprehensive understanding of the company's value.
Introduction to ATS Corp (ATS, Financial)
ATS Corp is a Canada-based company offering automation systems. The company designs and builds customized automated manufacturing and testing systems for customers, additionally providing pre- and post-automation services. ATS Corp's products include conveyor systems, automated electrified monorails, tray handlers, laser systems, and other hardware and software products. The company also provides pre-automation solutions, including strategic direction and planning services, as well as aftermarket support. ATS Corp's clients come from various sectors including life sciences, food and beverage transportation, consumer products and electronics, and energy. The company generates the majority of its sales from the North American and European markets.
At its current price of $43.1 per share and the market cap of $4.20 billion, ATS stock shows signs of being fairly valued. The following analysis will provide a deeper understanding of the company's valuation.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is computed based on three factors: historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance.
The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
ATS Corp (ATS, Financial) appears to be fairly valued according to the GuruFocus Value calculation. As ATS Corp (ATS) is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. ATS Corp (ATS, Financial) has a cash-to-debt ratio of 0.13, which is worse than 89.5% of 2839 companies in the Industrial Products industry. The overall financial strength of ATS Corp (ATS) is 6 out of 10, which indicates that the financial strength of ATS Corp (ATS) is fair.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. ATS Corp (ATS, Financial) has been profitable 10 over the past 10 years. Over the past twelve months, ATS Corp (ATS) had a revenue of $2 billion and Earnings Per Share (EPS) of $1.09. Its operating margin is 9.83%, which ranks better than 65.26% of 2867 companies in the Industrial Products industry. Overall, the profitability of ATS Corp (ATS) is ranked 9 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of ATS Corp (ATS, Financial) is 21.8%, which ranks better than 83.69% of 2735 companies in the Industrial Products industry. The 3-year average EBITDA growth rate is 27.5%, which ranks better than 77.39% of 2424 companies in the Industrial Products industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, ATS Corp (ATS, Financial)'s return on invested capital is 8.02, and its cost of capital is 13.22.
Conclusion
In conclusion, the stock of ATS Corp (ATS, Financial) gives every indication of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 77.39% of 2424 companies in the Industrial Products industry. To learn more about ATS Corp (ATS) stock, you can check out its 30-Year Financials here.
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