Keep buying ATS Corp, this portfolio manager says

The stock may be at an all-time high, but that shouldn’t stop investors from jumping into automation tech name ATS Corp (ATS Corp Stock Quote, Charts, News, Analysts, Financials TSX:ATS), says David Burrows of Barometer Capital Management. Burrows has named ATS one of his top picks for the 12 months ahead, saying secular tailwinds in automation will continue to float this boat for some time to come.

“Within the industrial space, machinery companies in particular are performing well, and we know that automation is something that is not going away,” said Burrows, speaking on a BNN Bloomberg segment on Monday.

Burrows said the re-shoring of manufacturing in North America is going to benefit the automation space in general, including ATS, which has skin in the electric vehicle (EV) game, as well, another secular strength.

“ATS did very well through the pandemic selling equipment into companies like Amazon that were building warehouses, but really, their business is in healthcare and consumer products and now EVs,” he said.

ATS continues to grow its revenue, as witnessed in its recent quarterly report, the company’s fiscal third quarter 2023, delivered earlier this month. The company’s topline was up 18 per cent year-over-year to $647.0 million, while net income was $29.2 million compared to $23.3 million a year earlier and adjusted EPS was flat at $0.52 per share.

Perhaps most impressive, however, were the company’s order bookings, which grew by a huge 46 per cent from a year earlier to $979 million, while ATS’ order backlog jumped 45 per cent to $2.143 billion.

“This performance demonstrates the need for our enabling solutions, the strength of our strategy and an unwavering commitment to the ATS Business Model despite continued supply chain challenges,” said CEO Andrew Hider in a press release.

The market has clearly noticed the good news coming from ATS. After initially falling with the rest of the tech and growth stock space in the first half of 2022, ATS has come roaring back. The stock went from a low of about $32 in May of last year back to its previous high of $50 by mid-January and it has since kept climbing to currently the $55 range.

But Burrows says there’s more gas in the tank with this stock, which should continue to do well even as interest rates continue to climb.

“We think automation companies are attractive, machinery is attractive. The group is outperforming the market,” he said. 

“Go to what’s working — we don’t have to fight in [stocks] that are hurt by rising rates.  We want to be in things that are benefiting in the current environment,” he said.