Why Celestica (TSX:CLS) Jumped 20% on the TSX Today!

Celestica (TSX:CLS)(NYSE:CLS) stock soared 20% in early morning trading after making a $306 million acquisition, but should you buy?

| More on:

Celestica (TSX:CLS)(NYSE:CLS) stock jumped 20% in early morning trading on Wednesday on the TSX today. Shares climbed after the supply chain solutions manager acquired Singapore-based PCI Limited for $306 million.

What happened?

The acquisition will add the design, engineering, and manufacturing solutions provider with five facilities across Asia. The purchase is expected to reap $325 million in annual revenue for 2021 alone and helps Celestica stock in its future growth strategy to move towards engineering systems.

Not only that, but Celestica stock has also remained focused on enterprise-level clients. PCI adds a further 20 blue-chip customers to its portfolio and creates multiple synergies in the process. Furthermore, Celestica management updated its outlook for 2022; EPS growth of 10% is now expected to be 20% or more.

So what?

The purchase clearly makes room for a lot of growth for Celestica stock on the TSX today. The company already had significant cash flow and funds available to make such a large investment. It now gets access to a wide portfolio in emerging markets, expecting to now reach annual revenue of $2.8 billion in 2022 from its advanced technology solutions segment, and $6.3 billion or more for its full-year revenue outlook.

The sale is expected to close for the fourth quarter of 2021, so the company reiterated its third-quarter guidance. Meanwhile, as of writing, Celestica stock is remains of significant value for Motley Fool investors. Right now, you can pick it up for a valuable 13.73 P/E ratio — and that’s even after the recent share growth — and an EV/EBITDA of 4.6!

Now what?

But growth is coming on strong, so these levels may not last very long. We’re still waiting for economic analysts to weigh in on the decision. But it looks like Celestica stock made a great purchase. It has managed its debt well in the past and is primed to make such a strong acquisition that furthers its bottom line.

Meanwhile, Celestica stock was already targeted to see an increase of a further 5% share growth for the next year. However, that’s likely to be updated based on the recent news. Given the industry of supply chains, Celestica stock looks to now be an excellent purchase for long-term investors on the TSX today, even as shares climb past 52-week highs.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Tech Stocks

profit rises over time
Tech Stocks

4 Reasons to Buy Constellation Software Stock Like There’s No Tomorrow

Constellation Software stock continued its climb upwards after recent earnings, and this only adds to its appeal.

Read more »

calculate and analyze stock
Tech Stocks

1 Stock That’s Just as Hot as Nvidia (Without All the Hype)

Nvidia stock may look like a strong option, but its valuation is through the roof. Enter this other under-the-radar stock.

Read more »

A plant grows from coins.
Tech Stocks

3 Growth Stocks Wall Street Might Be Sleeping on, But I’m Not

Don’t miss your chance to load up on these three beaten-down stocks.

Read more »

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

money goes up and down in balance
Tech Stocks

1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here's why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »