Celestica (TSX:CLS) may not be a household name, but it's quickly becoming one of the most attractive opportunities for stock investors in Canada. After surging by 278% in the previous three years, CLS stock has already popped by 205% so far in 2024 to currently trade at $118.31 per share with a market cap of $13.7 billion. If you don't know it already, it's a Toronto-based firm that mainly provides designing, manufacturing, and supply chain solutions for tech and industrial companies globally. It serves a diverse base of businesses across sectors, including aerospace, healthcare, telecommunications, and renewable energy.

If you're an investor looking for an impressive, growth-oriented investment option with solid fundamentals, Celestica stock might be worth your attention. In this article, I'll go over three big fundamental reasons why Celestica could be a great addition to your portfolio right now.

Strong demand for its services

The first reason Celestica stock currently stands out as a screaming buy right now is its ability to maintain a robust financial performance despite a challenging macroeconomic environment, mainly due to strong demand for its services. And this ability is clearly reflected in its recently released third-quarter financial report.

In the three months ended in September 2024, the company not only exceeded its own guidance but also delivered outstanding growth across key business segments. For example, Celestica's revenue surged 22% YoY (year over year) to reach US$2.5 billion last quarter, surpassing the high end of its guidance range and beating analysts' expectations of US$2.4 billion.

It's important to note that Celestica's success last quarter was largely driven by its Connectivity & Cloud Solutions (CCS) segment, which saw an impressive 42% YoY increase in revenue. This robust performance in the CCS segment highlights the growing demand for Celestica's cloud and communications infrastructure products, which are crucial as more businesses and services migrate to the cloud.

Strong profitability

In the latest quarter, Celestica's adjusted earnings soared by an impressive 60% YoY to US$1.04 per share, comfortably exceeding its guidance range of US$0.86 to US$0.96 and Street analysts' estimate of US$0.93 per share.

Similarly, Celestica's adjusted net profit margin also expanded to 5% in the September 2024 quarter from just 3.8% in the same quarter of the previous year. This kind of solid earnings growth and profit margin expansion not only underscores the Canadian manufacturing company's strong operational efficiency but also its ability to generate increasing returns for shareholders.

Focus on long-term growth initiatives

Beyond revenue and profit growth, Celestica's adjusted free cash flow also saw a significant increase, reaching US$74.5 million in the latest quarter, compared to US$34.1 million a year ago. Strong cash flow provides Celestica with greater flexibility to reinvest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders through buybacks. In fact, the company repurchased 2.2 million shares in the third quarter alone.

Recently, Celestica announced a strategic partnership with Groq, a California-based innovative company in the artificial intelligence (AI) space. Groq is currently known for its development of a proprietary language processing unit that accelerates AI inferencing. After this partnership, Celestica will support Groq in manufacturing AI and machine learning servers, with production expected to start in early 2025. With this partnership, Celestica is set to take a leading role in the fast-growing AI hardware sector, which has solid long-term growth potential.