Down 19 per cent over the past month, ATS Corp (ATS Stock Quote, Chart, News, Analysts, Financials NYSE:ATS) is looking cheap, says Stifel analyst Justin Keywood.
On October 18, Keywood, in a research update to clients, maintained his “Buy” rating and one-year price target of $75.00 on ATS.
“We provide an ATS update with recent pressure, down (19%) in the past month and shares now below the U.S. $41/C$55 IPO price,” he noted. “The softness could be related to a variety of factors, including the ongoing auto strike, choppy markets and concerns of the upcoming quarter but we see value creation as on-track.
The analyst says the company has resilient verticals in nuclear, food and beverage, and in Life Sciences. He also notes that the company has C$600-million in dry powder for M&A purposes and recently announced the acquisition of Wisconsin-based water purification player Avidity Sciences, with its 20 per cent EBITDA margins.
Keywood says the September 6 investor day revealed what he sees as the future of ATS.
“ATS is laying the foundation to become a much larger company, starting with people as part of the three key pillars of the ABM (people, process, performance),” he argued. “In that regard, management depth and quality were clear at the inaugural U.S. Investor Day. The automation industry is in the midst of benefitting from several secular tailwinds, including, supply chain de-risking, labour 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, in our view. De-risking the view is a solid management team with a track record of execution.
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