Investors often find themselves pondering whether they've missed the boat on a promising stock. Celestica (TSX:CLS), a leader in the electronics manufacturing services (EMS) industry, has been on the radar of many market enthusiasts.Â

Given its recent performance and the broader market conditions, up 289% in the last year alone, it's a pertinent question. Is it too late to buy Celestica stock? Let's delve into the data and earnings to provide a comprehensive answer.

Recent performance

Celestica has shown strong performance over the past year. As of the latest financial reports, the stock has appreciated significantly, driven by robust earnings and strategic growth initiatives. The company reported a revenue of US$7.1 billion for the fiscal year 2023, marking a 12% increase from the previous year. This growth was propelled by higher demand in key sectors such as aerospace, defence, and healthcare.

One of the critical indicators of a company's potential is its earnings performance. For the first quarter (Q1) 2024, Celestica reported an earnings per share (EPS) of US$0.44, beating analysts' expectations by US$0.06. The company's net income for the same period was US$56.7 million, a notable improvement from the US$45.3 million recorded in Q1 2023. This positive trend in earnings showcases Celestica's operational efficiency and its ability to capitalize on market opportunities.

Growth drivers

So, whatâs driving all this growth? There are a few reasons. The company has expanded its service offerings beyond traditional EMS, venturing into areas such as design and engineering services, supply chain management, and after-market services. This diversification has enabled Celestica to capture a broader market share and reduce dependency on any single revenue stream.

Plus, Celesticaâs acquisition of PCI Private Limited, a Singapore-based electronics manufacturing services company, has significantly bolstered its capabilities in high-growth markets. This acquisition is expected to contribute approximately US$330 million in annual revenue, enhancing Celestica's competitive edge.

Whatâs more, the company's emphasis on sectors like aerospace, defence, and healthcare has positioned it well to benefit from the increasing demand in these industries. The aerospace and defence sector, in particular, is expected to grow at a compound annual growth rate (CAGR) of 5.6% from 2023 to 2028, providing a strong growth avenue for Celestica.

Looking ahead

Despite its recent gains, Celestica's stock still presents a compelling valuation. As of the latest data, the stock trades at a forward price-to-earnings ratio of 22.91, which is relatively lower compared to peers. This suggests that the stock is still undervalued, offering potential upside for investors.

Moreover, the broader market conditions remain favourable for Celestica. The global EMS market is projected to grow at a CAGR of 7.5% over the next five years, driven by the increasing complexity of electronic products and the outsourcing trend among OEMs (original equipment manufacturers). Celestica, with its strong market position and diverse service offerings, is well-poised to benefit from these trends.

Bottom line

While Celestica's stock has seen significant gains over the past year, the data and earnings performance suggest that it is not too late to buy. The company's strong financial health, strategic growth initiatives, and favourable market conditions indicate that there is still substantial upside potential. For investors looking to add a robust player in the EMS industry to their portfolio, Celestica presents a compelling opportunity.

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