Q: Hi Team,
With HPS.A struggling to catch a bid lately, would you think selling the stock to buy CLS is a good move long term? Is the movement in CLS share price sustainable? Or should more patience be applied here to HPS.A?
Thanks,
Shane.
With HPS.A struggling to catch a bid lately, would you think selling the stock to buy CLS is a good move long term? Is the movement in CLS share price sustainable? Or should more patience be applied here to HPS.A?
Thanks,
Shane.
5i Research Answer:
Currently, HPS.A is seeing more downside pressure due to its greater focus on manufacturing, which some investors are shying away from due to looming tariffs between the US and Canada. CLS has more business activity in the design, and engineering side which helps to better insulate it from the impact of tariffs. Overall, CLS has had great momentum, its valuation is becoming expensive at 28X forward earnings relative to HPS.A at 14X, but forward growth is expected to be stronger for CLS than HPS.A.
We would be comfortable with this switch, although, CLS has had a parabolic run, and any real indication that its forward sales or earnings could soften due to cyclicality in the AI theme could cause a sharp decline in its price.