ATS’s share price was largely flat in 2023, while earnings continued to grow at a healthy pace over that time. ATS is trading at 20x Forward P/E, which is fair compared to historical averages. The valuation slightly compressed from 23.3x at the beginning of 2023, which explains somewhat the flat share price. Having said that, the company also started to repurchase shares (not at a huge scale), and ATS continues to execute its growth playbook well through acquisitions. The last quarter did slightly miss estimates, which likely made some investors worried about continuing growth prospects. The balance sheet is also fairly levered, so there is some negative margin impact from higher interest rates. We think investors need more patience for the thesis to work out.
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