QS Research · Michael Burry's Scion Capital analyst template · 2006
CELESTICA INC (CLS)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: PASS
Conviction medium · base case 0% · downside -20% · upside +18%
Pass. I keep section 13's TTM-to-Sep-2026 base ($18.23B revenue, $1.50B EBIT, $1.69B EBITDA, $1.25B net income, $545.4M FCF and $22.92B EV) because it is the reported-through-10-Q earnings base and it already captures the AI ramp. At $206.68 the stock is 13.6x EV/EBITDA and 20.9x P/E, inside the 10.8x-16.0x peer EBITDA range and cheaper than the named EMS peers on P/E. Base case holds 13.6x, or 0.0%; the peer floor of 10.8x gives -20.4% and the peer ceiling of 16.0x gives +18.0%, so the long rule (base >=+30% and downside no worse than -25%) is not met. The market is not missing the growth—guidance already assumes $21.0B 2026 revenue/$11.55 EPS and $40.0B/$21.50 for 2027—but it is correctly discounting 85% top-10 concentration, $1.5-2.0B 2027 capex and the FCF cut to $460M, leaving no deep-value margin of safety.
Key numbers
- Share price: $206.68
- Market cap: $26.06B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $18.23B
- EV / EBITDA (TTM): 13.6x
- P/E (TTM): 20.9x
- Price / book: 4.19x
The 15 boxes
- ✓ 1. Long-form business notes
Celestica is a contract design and manufacturing (EMS/ODM) company in two segments: CCS (Communications and Enterprise — switches, optical systems, servers, storage, racks for hyperscalers and OEMs) and ATS (Aerospace & Defense, Industrial, HealthTech, Capital Equipment). Between FY2020 and FY2025 the business flipped toward hyperscale data center work: HPS went from 15% of FY2020 revenue to 41% of FY2025 revenue, CCS revenue rose 42% to $9.19B in FY2025, and total revenue rose from $7.25B (FY2022) to $12.39B (FY2025) with operating income of $1.04B, so the profit is operating-led, not one-off driven. Concentration rose with the mix: top 10 customers were 79% of FY2025 revenue versus 66% in FY2020, with three CCS customers each above 10% (32%, 14%, 12%).
- ✓ 2. Competitive advantage
Celestica shows improving margins and returns, but the sources describe an intensely competitive, low-differentiation contract manufacturing business where customers hold the leverage. Gross margin rose from ~9.0% in FY2022 to ~12.0% in FY2025 and operating margin from ~4.0% to ~8.4%, yet contracts carry mandated price reductions and customers do not commit to long-term volumes, can in-source or second-source at will, and the top 10 customers were 79% of FY2025 revenue. The company's stated advantage — advanced manufacturing, design and engineering, delivery and complexity management — is asserted rather than quantified, and it concedes some competitors have greater scale and broader service ranges.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended September 30, 2026) revenue was $5,829.7 million, up 83% year over year, and YTD 2026 revenue was $14,575.3 million, up 67%, driven by Compute & Storage (+242% in Q3 2026) and Networking (+68%). Gross margin compressed to 11.0% from 13.0% on CCS mix and a swing in TRS fair value adjustments, while segment margins improved (CCS 8.9% vs 8.3%; ATS 6.6% vs 5.5%) and net earnings were $397.2 million ($3.26 diluted EPS) with only $0.9 million of restructuring and other charges. Cash rose to $3,961.3 million at September 30, 2026 from $595.6 million at December 31, 2025 after a $3,391.3 million net August 2026 offering, but working capital is stretching (inventory days 70 vs 60 in Q4 2025) and $700.8 million of A/R was sold at quarter end versus nil at December 31, 2025. Customer concentration worsened: top 10 customers were 85% of Q3 2026 revenue, with three CCS customers at 35%, 17% and 14%.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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