3 AI Infrastructure Stocks With Quality Earnings Trading Below Richer Peers

Germany's 10 year government bond yield is around levels last seen in 2011, as investors react to ongoing European Central Bank hawkishness and oil price risks. Higher bond yields often pressure richly priced stocks and can leave high quality cash generators trading at a discount. That is where the High Quality Undervalued Stocks screener comes in. This article highlights 3 stocks from the screener that may merit closer inspection at this time.

The three stocks below are a starting sample only. The full High Quality Undervalued Stocks screen surfaces 11 more companies that carry similarly compelling stories but are not covered here. If you want to identify your own highest conviction ideas from this group, head straight to the High Quality Undervalued Stocks screener.

Stantec (TSX:STN)

Overview: Stantec is a global engineering and consulting company that designs and manages infrastructure and sustainability projects, with a particular focus on water systems, transportation networks, and public buildings that are often backed by long-term municipal and utility contracts. Alongside this core infrastructure work, Stantec also provides architecture, environmental and ESG consulting, and project management services to public and private clients.

Operations: Stantec generates most of its revenue in the United States at about CA$3.6b, with Canada contributing roughly CA$1.6b and its Global segment about CA$1.7b, supported by a diversified footprint across Canada, the U.S., the U.K., Australia, and other international markets.

Market Cap: CA$11.5b

Stantec may be worth a closer look for investors seeking exposure to infrastructure and sustainability projects that can support steady cash generation through long dated contracts. The company has been winning complex water and coastal resilience work, building a record CA$9.2b backlog that is tied to public sector funding and long project lifecycles. The stock trades on a P/E that is below many peers, yet Stantec carries meaningful debt and depends heavily on government infrastructure budgets, which can introduce setbacks if priorities change or projects are delayed. With a leadership transition ahead and ongoing acquisitions to integrate, a key consideration is how effectively Stantec converts its backlog into higher quality earnings over time.

Stantec’s record CA$9.2b backlog and lower P/E may be masking a very different risk reward profile than the market assumes. Get the full story in the 5 key rewards and 1 important warning sign

Celestica (TSX:CLS)

Overview: Celestica is a Toronto based manufacturing and supply chain specialist that builds and manages complex hardware for original equipment makers, cloud providers and hyperscalers, including large scale servers, racks and infrastructure platforms that support AI and cloud data centers. Alongside this Connectivity and Cloud Solutions work, the company also serves aerospace, defense, industrial and health technology customers with design, assembly, testing and after market services.

Operations: Celestica generates most of its revenue from Connectivity & Cloud Solutions at about US$12.3b, with Advanced Technology Solutions contributing roughly US$3.3b.

Market Cap: CA$46.9b

Celestica provides direct exposure to AI and cloud infrastructure through its Connectivity & Cloud Solutions segment, where it builds high end servers, racks and platforms for hyperscalers and partners with AMD on the Helios rack scale AI platform. The company reports net margins of 7.2% and a strong return on equity, which indicates efficient use of capital and solid cash generation. Key risks include heavy revenue concentration in a small number of hyperscaler customers and dependence on AI and cloud investment cycles, which can introduce sharp swings if orders slow or product ramps face challenges. For investors comfortable with that concentration risk, the overall profile of the business may merit further research.

Celestica’s AI and cloud hardware story looks powerful. However, its 7.2% net margin and strong return on equity only tell part of the picture. Get the full context in the analysis report for Celestica

MDA Space (TSX:MDA)

Overview: MDA Space is a Canadian space technology company that builds and operates satellite communications systems, space robotics such as Canadarm3 and the MDA SKYMAKER platform, and Earth observation satellites and data services for government and commercial customers worldwide.

Operations: MDA Space generates all of its CA$1.9b revenue from a combined Geointelligence, Robotics & Space Operations and Satellite System segment, with most sales coming from Canada at CA$1.2b and the United States at CA$550.3 million, and smaller contributions from Europe, Asia and the Middle East, and other regions.

Market Cap: CA$6.9b

MDA Space brings together space robotics, satellite manufacturing and Earth observation in a single business that is already producing hardware like Canadarm3 and digital satellites under the MDA AURORA line, backed by multi year contracts such as the large EchoStar constellation order and expanding work with Telesat. This provides the company with cash flow tied to the same systems that could benefit from rising defense and broadband demand. At the same time, investors need to weigh heavy capital spending on new facilities, a recent period of margin pressure, dilution and insider selling, and strong competition from larger players. For investors who want exposure to space infrastructure as a potential “hidden engine” of returns, the full story behind MDA Space is worth closer attention.

MDA Space brings together long term contracts, heavy capital spend, and a recent bout of margin pressure, which can make its real earnings power hard to read. Catch the full risk and upside picture in the analysis report for MDA Space

Seeking Fresh Alternatives Before Others?

Markets move fast and today’s quiet outlier can turn into tomorrow’s breakout once momentum catches on. Scan these fresh ideas before the crowd notices and consider them promptly.

• Target resilient cash generators that can hold up when sentiment shifts by scanning the curated list of solid balance sheet and fundamentals (12 results).
• Explore structural themes in power, grids and electrification by reviewing the hand picked companies inside the 39 power grid technology and infrastructure stocks.
• Focus on AI builders that already produce profits by assessing companies featured in the carefully filtered 76 profitable AI stocks that aren't just burning cash.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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