Q: Like most, I'm down on TIXT - time to average down or switch to something like ATS which is off about 20% from its high? Looking long-term on this...thanks
5i Research Answer:
We removed TIXT from the growth model portfolio on October 10th as the drop in demand from some of its larger clients is concerning. Execution has not been great, and its debt levels are growing fast. ATS is roughly double the size of TIXT ($3.7B vs. $1.9B, respectively), and its forward growth rates are anticipated to be better than TIXT. Fundamentally, ATS is a better name than TIXT, but this is reflected in its higher valuation (18.6X forward earnings vs. TIXT at 7X forward earnings). For a higher quality company and a long-term investment horizon, we would be comfortable with a switch to ATS today.