On Friday, Raymond James made an adjustment to the price target of ATS Corporation (ATS:CN) (OTC: ATSAF), lowering it from Cdn$65.00 to Cdn$60.00. Despite this change, the firm has maintained an Outperform rating for the company's stock. The revision comes as a result of a reassessment of the company's free-cash conversion and the anticipated focus on this metric in the upcoming quarters.
The analyst at Raymond James cited a blend of EV/EBITDA and P/E multiples as the methodology behind the target price derivation. The firm continues to recognize significant growth potential for ATS Corporation, which justifies the target multiples being set above the historical average.
However, due to the lower than expected free-cash conversion, the forward target multiple has been adjusted to 13.0x F2026E EBITDA, down from the previous 14.0x. This new multiple still stands above the 5-year average of approximately 12.2x, and compares to U.S. peers trading at around 17.2x 2025 EBITDA.
In addition to the EV/EBITDA multiple, the price-to-earnings (P/E) ratio is also considered in the valuation. The target P/E multiple has been revised to 22.5x F2026E EPS, a decrease from the former 25.0x. Despite this reduction, the target remains at a premium to the 5-year historical average P/E multiple of about 20.3x.
The analyst emphasized the growth prospects of ATS Corporation as a key factor supporting the premium multiples. The lowered price target of Cdn$60.00 reflects the updated valuation multiples and the company's financial outlook as considered by Raymond James.
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