SANMINA CORP (NASDAQ:SANM) is an electronics manufacturing services provider that fits the profile of an affordable growth stock, a strategy that seeks companies where strong earnings expansion is paired with valuation multiples that have not yet caught up. The approach favors businesses growing at an above-average pace but not priced for perfection, while also requiring acceptable financial health and profitability to reduce the risk that a deteriorating balance sheet undermines the growth story.
Growth Is Accelerating
The growth picture for Sanmina is the strongest part of its fundamental profile:
- Earnings per share grew 81.07% over the past year
- EPS has compounded at 14.53% annually over the last several years
- Revenue increased 58.56% in the past year
- Revenue growth is expected to accelerate to 30.14% per year going forward
- Analysts expect EPS to grow at 34.70% per year over the coming years
The acceleration is notable. The company is not only reporting strong past results, but forward estimates suggest the pace is picking up, which is exactly what the affordable growth methodology looks for.
Valuation: Growth at a Reasonable Price
The valuation side of the report reinforces the case:
- P/E ratio of 19.55, cheaper than 84.55% of industry peers
- Forward P/E of 15.54, cheaper than 82.93% of the same peer group
- EV/EBITDA more attractive than 79.67% of the industry
- Price/Free Cash Flow cheaper than 88.62% of the industry
- PEG ratio points to a relatively cheap valuation once growth is factored in
With a forward P/E of 15.54 and expected EPS growth of 34.70%, the market is assigning a moderate multiple to what could be a substantially larger earnings base in a few years. Investors who want to review the full fundamental breakdown can check the detailed fundamental analysis report.
Health and Profitability: Sufficient to Qualify
Sanmina scores 5 out of 10 on financial health and 6 out of 10 on profitability. These are not standout numbers, but they are adequate for the affordable growth strategy, which looks for decent fundamentals rather than best-in-class metrics.
On the health side:
- Debt/FCF ratio of 3.66, meaning it would take roughly 3.7 years of free cash flow to pay off all debt
- Improved debt-to-assets ratio compared with last year
- Share count has declined both over the past year and over the past five years
- Altman-Z score of 2.58, indicating limited near-term bankruptcy risk
- Current ratio of 1.78, suggesting short-term obligations are manageable
Profitability is mixed but acceptable:
- Profitable in each of the past five years
- Operating cash flow positive throughout that period
- ROIC of 10.06% outperforms 82.11% of industry peers
- ROE of 12.04% beats 76.42% of the industry
- However, ROIC remains below the cost of capital
The health and profitability scores are not the reason to own the stock, but they are strong enough to support the growth and valuation story.
The Affordable Growth Case in Context
What makes Sanmina interesting under this strategy is the combination of a high growth rating (8/10) and a high valuation rating (8/10), with health and profitability scores that are passable. That combination is relatively rare. Many fast-growing companies are expensive, and many cheap companies are not growing. With the S&P 500 in a positive trend on both long-term and short-term timeframes, investor appetite for growth is strong, which makes the valuation discipline of this screen even more relevant. Sanmina sits in the sweet spot where growth is strong but the market has not yet demanded a premium multiple.
There are risks to consider. The ROIC below the cost of capital suggests the company is not currently earning more than its capital costs, and the gross margin of 9.01% leaves limited room for error in a competitive manufacturing environment. Sanmina also pays no dividend, so the investment case depends entirely on earnings growth and multiple expansion.
Investors looking for other stocks that meet the same affordable growth criteria can browse the Affordable Growth screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »
View the Zacks #1 Rank List
Sanmina (NASDAQ:SANM): An Affordable Growth Opportunity
SANMINA CORP (NASDAQ:SANM) is an electronics manufacturing services provider that fits the profile of an affordable growth stock, a strategy that seeks companies where strong earnings expansion is paired with valuation multiples that have not yet caught up. The approach favors businesses growing at an above-average pace but not priced for perfection, while also requiring acceptable financial health and profitability to reduce the risk that a deteriorating balance sheet undermines the growth story.
Growth Is Accelerating
The growth picture for Sanmina is the strongest part of its fundamental profile:
The acceleration is notable. The company is not only reporting strong past results, but forward estimates suggest the pace is picking up, which is exactly what the affordable growth methodology looks for.
Valuation: Growth at a Reasonable Price
The valuation side of the report reinforces the case:
With a forward P/E of 15.54 and expected EPS growth of 34.70%, the market is assigning a moderate multiple to what could be a substantially larger earnings base in a few years. Investors who want to review the full fundamental breakdown can check the detailed fundamental analysis report.
Health and Profitability: Sufficient to Qualify
Sanmina scores 5 out of 10 on financial health and 6 out of 10 on profitability. These are not standout numbers, but they are adequate for the affordable growth strategy, which looks for decent fundamentals rather than best-in-class metrics.
On the health side:
Profitability is mixed but acceptable:
The health and profitability scores are not the reason to own the stock, but they are strong enough to support the growth and valuation story.
The Affordable Growth Case in Context
What makes Sanmina interesting under this strategy is the combination of a high growth rating (8/10) and a high valuation rating (8/10), with health and profitability scores that are passable. That combination is relatively rare. Many fast-growing companies are expensive, and many cheap companies are not growing. With the S&P 500 in a positive trend on both long-term and short-term timeframes, investor appetite for growth is strong, which makes the valuation discipline of this screen even more relevant. Sanmina sits in the sweet spot where growth is strong but the market has not yet demanded a premium multiple.
There are risks to consider. The ROIC below the cost of capital suggests the company is not currently earning more than its capital costs, and the gross margin of 9.01% leaves limited room for error in a competitive manufacturing environment. Sanmina also pays no dividend, so the investment case depends entirely on earnings growth and multiple expansion.
Investors looking for other stocks that meet the same affordable growth criteria can browse the Affordable Growth screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »