ATS stock is still undervalued, Stifel says

Following the company’s investor day in New York City, Stifel analyst Justin Keywood remains bullish on ATS Corp (ATS Corp Stock Quote, Chart, News, Analysts, Financials TSX, NYSE: ATS)

On September 6, ATS hosted its annual institutional investor day.

Keywood says that as ATS business scales, this event showed off the depth of its management.

“We were pleased to attend ATS’ inaugural U.S. investor day held in New York City, following the May NYSE listing and IPO,” the analyst said. “ATS’ leaders presented segments of the business, including Life Sciences, Industrial Automation, Food & Beverage, After-Sales Services and Process Automation (PA)/Digital, along with key executives providing overviews and insight. Hologic Inc. (NASDAQ:HOLX), as a marquee ATS customer, also participated in a fireside chat and spoke to the high quality and reliability at ATS, strong service and quick time to market, critical attributes within Life Sciences. The customer also highlighted using solutions across recently acquired ATS companies (Biodot/SP Industries), demonstrating cross-selling synergies, along with mentioning 16 automation lines executed on for one particular product area, implying high repeat orders. Overall, we were impressed with the level of management depth and see the business as continuing to scale well with higher margins and an assumed greater trading multiple ahead.”

In a research update to clients September 6, Keywood maintained his “Buy” rating and one-year price target of (C) $75.00 on ATS, which closed September 6 at $60.75.

The analyst thinks ATS will post EBITDA of (C) $478.8-million on revenue of $2.95-billion in fiscal 2024.

“ATS is laying the foundation to become a much larger company and starting with people, as part of the three key pillars of the ABM (people, process, performance),” Keywood concluded. In that regard, management depth and quality was clear at the inaugural U.S investor day. The automation industry is in the midst of benefiting from several secular tailwinds, including, supply chain de-risking, labor constraints, rising wages and union action, among other trends (pg.3), and we see ATS as one of the few ways to gain pure play exposure at reasonable valuation. As scale builds, both organically and through M&A, margins should follow and lead to a greater multiple and higher stock price. De-risking the view is a solid management team with a track record of execution. ATS currently trades at 13.5x EBITDA vs. peers at 17x and we maintain our street high $75.00 target.”