NYSE:CLS is not too expensive for the growth it is showing.

Discover CELESTICA INC (NYSE:CLS), an undervalued growth gem identified by our stock screener. NYSE:CLS is shining in terms of growth metrics, and it's also displaying strong financial health and profitability. What's more, it retains an appealing valuation. We'll break it down further.

Growth Assessment of NYSE:CLS

ChartMill assigns a Growth Rating to every stock. This score ranges from 0 to 10 and evaluates the different growth aspects like EPS and Revenue, both in the past as in the future. NYSE:CLS scores a 7 out of 10:

• The Earnings Per Share has grown by an impressive 60.09% over the past year.
• Measured over the past years, CLS shows a quite strong growth in Earnings Per Share. The EPS has been growing by 17.61% on average per year.
• Looking at the last year, CLS shows a quite strong growth in Revenue. The Revenue has grown by 17.52% in the last year.
• Based on estimates for the next years, CLS will show a very strong growth in Earnings Per Share. The EPS will grow by 27.81% on average per year.
• The Revenue is expected to grow by 14.98% on average over the next years. This is quite good.
• The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
• When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

Valuation Examination for NYSE:CLS

ChartMill employs its own Valuation Rating system for all stocks. This score, ranging from 0 to 10, is determined by evaluating different valuation factors, including price to earnings and free cash flow, both in absolute terms and relative to the market and industry. NYSE:CLS has earned a 6 for valuation:

• Based on the Price/Earnings ratio, CLS is valued a bit cheaper than 66.40% of the companies in the same industry.
• CLS's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. CLS is cheaper than 67.20% of the companies in the same industry.
• 64.80% of the companies in the same industry are more expensive than CLS, based on the Enterprise Value to EBITDA ratio.
• CLS's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. CLS is cheaper than 67.20% of the companies in the same industry.
• The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
• The excellent profitability rating of CLS may justify a higher PE ratio.
• A more expensive valuation may be justified as CLS's earnings are expected to grow with 27.49% in the coming years.

Health Assessment of NYSE:CLS

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NYSE:CLS, the assigned 5 reflects its health status:

• An Altman-Z score of 3.67 indicates that CLS is not in any danger for bankruptcy at the moment.
• CLS has a debt to FCF ratio of 2.47. This is a good value and a sign of high solvency as CLS would need 2.47 years to pay back of all of its debts.
• CLS has a better Debt to FCF ratio (2.47) than 72.80% of its industry peers.
• A Debt/Equity ratio of 0.49 indicates that CLS is not too dependend on debt financing.
• Although CLS does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.

Evaluating Profitability: NYSE:CLS

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NYSE:CLS scores a 8 out of 10:

• With a decent Return On Assets value of 6.36%, CLS is doing good in the industry, outperforming 78.40% of the companies in the same industry.
• With an excellent Return On Equity value of 20.73%, CLS belongs to the best of the industry, outperforming 90.40% of the companies in the same industry.
• Looking at the Return On Invested Capital, with a value of 13.55%, CLS belongs to the top of the industry, outperforming 90.40% of the companies in the same industry.
• The 3 year average ROIC (8.21%) for CLS is below the current ROIC(13.55%), indicating increased profibility in the last year.
• CLS has a Profit Margin of 4.08%. This is in the better half of the industry: CLS outperforms 68.00% of its industry peers.
• CLS's Profit Margin has improved in the last couple of years.
• CLS's Operating Margin of 5.61% is fine compared to the rest of the industry. CLS outperforms 68.00% of its industry peers.
• In the last couple of years the Operating Margin of CLS has grown nicely.
• In the last couple of years the Gross Margin of CLS has grown nicely.

Our Affordable Growth screener lists more Affordable Growth stocks and is updated daily.

For an up to date full fundamental analysis you can check the fundamental report of CLS

Keep in mind

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.