Staying power versus one-day wonders

Stock’s high price not necessarily a red light

Passing up on a stock purchase just because the price has run up can be a costly mistake. You could miss out on a huge capital gain.

“I should have bought last month. It’s too expensive now,” is a typical reaction. Sometimes it’s the right call. Sometimes it’s not.

When I first wrote about Amazon.com Inc. (NSD: AMZN) in my Internet Wealth Builder newsletter in January 2017, the shares were trading at US$817.14, with a trailing 12-month price/earnings ratio of 182.80.

“So, does that mean don’t buy?”, I asked rhetorically. No. Five years earlier, the shares could have been purchased for about US$200. I suggested that down the road, Amazon would be even more expensive.

That’s what happened. In June 2022, the stock split 20-1, giving us an adjusted book price of US$40.86. Amazon closed June 13 at US$212.10, for a profit of 419% since the original recommendation.

Nvidia Corp. (NSD: NVDA) is another example. We wrote about it in May 2021 at a split-adjusted price of US$16.24. At the time, we noted that the shares were already up more than 200% year-to-date and had a p/e ratio of 94.17. But the company had a virtual monopoly in producing the computer chips needed for AI, so we advised readers to take a closer look. Nvidia currently trades at $141.97, for a profit of 774% since we added it to our recommended list.

Stock’s price-runup could have staying power

All this is to point out that when a stock goes on a run, the trend can continue for a long time. We’re seeing something similar with Canada’s Celestica Inc. (TSX: CLS). After years in the doldrums, the stock, which is rapidly integrating AI features into its products,  suddenly caught fire in 2023 and finished the year with a gain of 154.33%. We wrote about it in November of that year at $38.46, even though the stock had already gained 148% in the first 10 months.

Celestica shares have been rising ever since. They gained 241.82% in 2024 and are ahead 28.34% this year (to June 13). Is it too late? Probably not.

The company recently reported first quarter 2025 results. Revenue was $2.65 billion, up 20% from $2.21 billion in the same period of 2024. (Note that the company reports in U.S. dollars.) Celestica’s Connectivity & Cloud Solutions (CCS) segment was a major driver of growth, with a 28% year-over-year revenue increase to $1.84 billion.

Adjusted earnings per share were $1.20 compared with $0.83 in the prior year, an increase of 44%.

CEO Rob Mionis said revenue and earnings surpassed the company’s expectations. As a result, he said Celestica has increased its guidance for 2025. Revenue is now expected to be $10.85 billion, an increase from $10.7 billion previously. Adjusted EPS is now expected to be $5, up from $4.75.

As with Amazon and Nvidia, I expect Celestica’s share price to continue to rise this year, although perhaps not at the same fast rate. The stock remains on the Internet Wealth Builder’s recommended list. It closed in Toronto on June 13 at $170.26.

Some stocks are one-day wonders

A word of caution. Just because a stock is expensive doesn’t mean it will keep going up. There were many flameouts at the end of the pandemic when stay-at-home companies like Teladoc Health, Docusign, and Roku saw prices crash.

Initial public offerings (IPOs) can also be treacherous. Shares in plant-based protein producer Beyond Meat went public in May 2019 at US$25. The stock more than doubled in price in the first day of trading and within three months it had risen 840%! Expensive, yes. Still good value? No. The company was losing money and was attempting to persuade millions of people to change their eating habits. That’s not an easy task, and it didn’t succeed. The stock closed at US$3.16 on June 13.

So, do your homework. A high share price and p/e ratio should be a caution signal but not a red light. If the fundamentals are good and the business model is compelling, don’t let a high price scare you off.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

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Notes and Disclaimer

Content © 2025 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

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