The first was from early March and the second was their response to a question from yesterday. Opened a position this morning. GLTA
CLS's trend in sales and earnings has really begun to accelerate over the past few years, whereas it saw mostly stagnant sales for the two decades prior. The company has also managed to expand its margins over the past few years, whereas margins were largely flat previously. Its free cash flows have also demonstrated nice expansion in line with its sales and earnings improvements. Its enterprise segment has been growing significantly (+46% year-over-year), and this consists of its servers and storage businesses, which has been benefiting from the rise in AI demand. From a valuation standpoint, the company remains at an attractive valuation (15.5X forward earnings and 0.6X forward sales).
CLS also benefits from the aerospace and defense, industrial, health tech, and capital equipment industries, but if AI demand slows significantly, CLS would likely see a decline in its forecasted growth, and this would be a considerable risk for the company.
It is now a $7.6B company, with a relatively cheap valuation, and good fundamentals. We would be comfortable holding for a 5-year plus position while acknowledging its smaller size and position sizing.
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Would love your thoughts on why CLS is falling faster than its peers of late. Would you suggest continuing to hold (if long) or buy if not owned? How concerned are you about an upcoming EPS release?
Many times, in a correction, the stocks with the biggest gains often take the biggest hits. It is much easier for some investors to sell a stock up 65% than to sell a stock up fractionally, or down. Most tech or related stocks have had a very tough April, but CLS has had no specific material news. It ran pretty hard on its AI potential, and AI stocks fell out of bed last week. It is only 14X earnings, with a very strong balance sheet and good earnings growth, so we do think it is a keeper. We have no specific reason to be concerned about the Q1, though investors do seem to be in a selling mood these days. But, for now, we would see this as a normal market correction and not a time for panic. (5iResearch)