Q: Hi - leaving out the "it's still up 30% ytd" aspect, ATS has started a defined trend downward. What do you attribute it to...are they higher beta with respect to the economy and possible retrenchment on capital spending budgets for companies? In other words, apart from profit taking, do you think the market is projecting a hit to their order book? Thanks as always!!
5i Research Answer:
ATS share price has been under pressure recently along with the broad market, as the market sentiment factors in the scenario that interest rates may stay higher for longer, which not only impacts growth in orders for industrial space such as ATS, but also the valuation multiple that investors are willing to pay for high-growth name such as ATS. Having said that, ATS’s valuation is still attractive, in our view. ATS has been well-run over the years, and it has a decent backlog and fairly visible growth. Its recent acquisitions also look good. 'Future' orders might be impacted in a recession, but we would say that pretty much anytime.