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Turning the Line at ATS

02/25/2009 12:01 am EST


Benj Gallander

President, Contra the Heard

Benj Gallander, editor of Contra the Heard, thinks this Canadian automation company is a bargain.

We like ATS Automation Tooling Systems (TSE: ATA.TO). We’ve liked [this automation company] for a long time and continue to like it. Others like it as well. For instance, underwriters signed a bought deal in December for ten million shares of ATS at $5.00 per share (with an option to buy a million and a half more at the same price). (It closed at $3.32 Monday—Editor.)

If you stay tuned to Business News Network (BNN) long enough, Canada’s version of CNN, you’ll hear ATS mentioned with a striking regularity and typically in a positive light.

But that is not to say the market hasn’t dragged the stock around like a rag doll. People’s opinions on this company have been a bit skittish. Seemingly this has been based on the two, very different, “hot button” issues, solar energy and the North American car industry.

But just what strange and challenging times we live in was evidenced by the market reaction to ATS’s results for the second quarter in November. Objectively speaking, they were impressive, with earnings of $13.6 million, compared to a loss of $16.9 million, in the same period last year. Revenue rose 49% to $219.5 million due to a stronger order backlog at the Automation Systems Group and lower operating margins in the Photowatt Technologies division.

(In third-quarter numbers, recently announced, revenues were again up—27%—and earnings were 16 cents per share, compared with last year’s loss of five cents per share, results that also did not help the company’s share price—Editor).

Chief executive officer Anthony Caputo emphasized that there will be an increased focus on the market and supply chain management to [help ATS] adjust to a tougher global economy.

Should ATS’s stock really be hovering around the four-dollar mark? Should one assume that the price is a fair representation of company value? To these questions we say “no, no.”

Surely, if we all got aboard the Starship Enterprise and Scotty transported us back a few years (or a few into the future), the numbers that ATS posted would have pushed the share price into double digits.

We like owing this unique company that is also uniquely Canadian. When the economy starts to show signs of recovery, one is likely to see the ATS share price already well around the turn.

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