Is ATS stock a buy?

It’s a value stock that could generate some momentum.

That’s the takeaway from Stifel analyst Justin Keywood, who in a research update to clients April 15 summarized the current state of affairs for ATS Corp (ATS Corp Stock Quote, Chart, News, Analysts, Financials TSX:ATS) as a company that has lost a quarter of its market cap this year.

The analyst says ATS’s business has become less predictable with its exposure to the electric vehicle market.

“ATS’ EV business has tripled in three-years, driven by C$800mm in orders from one OEM,” he noted. “The EV opportunity is wide, but highly variable and delayed orders, along with negative industry developments have led us to re-evaluate our estimates. We now expect EV to generate ~C$720mm in F2025 with orders still contributing currently but down (20%) YoY. Margins are expected to be maintained at around current levels with other areas of the business picking up and with risk mitigation efforts.”

Keywood April 15 maintained his “Buy” rating on ATS stock, but lowered his price target from $73.00 to $68.00.

The analyst thinks ATS will generate EBITDA of $464.9-million on revenue of $2.97-billion in fiscal 2024. He expects those numbers will improve to EBITDA of $466.8-million on a topline of $2.97-billion in fiscal 2025.

“ATS initiated its NCIB in late March, repurchasing 40k shares at an average price of C$46, 10% higher than the current share price for $2mm,” Keywood added. “ATS has utilized the NCIB successfully in the past at ~C$16-$18, early in the pandemic and ~C$32 in 2022. ATS now trades at 11x NTM EBITDA, vs. a three-year low at 10x and comps at 15x. We see the current share price level as very favorable, where a re-rating could happen relatively quickly. ATS’ LifeSciences, F&B and Nuclear segments are in good shape and M&A would diversify EV that could lead to a multiple re-rating. Further, we see the possibility of divesting the EV segment as a strategic alternative that may also highlight greater overall valuation.”