Sanmina Stock Down 92% From High; Could Be a Great Opportunity

Sanmina Corp Grows as Global Economy Rebounds

Back in the late 1990s, we witnessed the rise of technology hardware companies and the corresponding rise of companies that offered third-party manufacturing services. This group, known as electronic manufacturing services (EMS) providers, would become the stars of Wall Street. But then the bottom collapsed in early 2000.

Today, most of the EMS companies are still around, albeit at a smaller scale. They’re also now more technologically advanced and offer high-tech services in addition to their legacy manufacturing. That’s the situation with Sanmina Corp (NASDAQ:SANM).

Back in July 2000, SANM stock was trading at a whopping $354.00. It may not seem that high based on the prices of some of the major technology stocks today, but that price shows that euphoria was also around back then.

I doubt Sanmina stock will ever reach that plateau again, at least not in my lifetime. But at its current price (around $30.00) and its cheap valuation, SANM stock is worth a look as a long-term play on the global EMS sector.

The Sanmina stock chart shows a strong V-shaped rally to well above its pre-COVID-19 price of $18.34.

Chart courtesy of StockCharts.com

Look for SANM stock to retest its 52-week high of $34.96. A break here could provide the fuel for a challenge at long-term resistance of $36.00–$42.00, last seen in 2017.

Revenue Growth, Profitability, & Cheap Valuation

Sanmina Corp reports in a fiscal year ending around September 30.

The company’s revenues edged higher in the four years from fiscal 2016 to a record $8.2 billion in fiscal 2019, prior to the pandemic-induced decline in fiscal 2020.

(Source: “Sanmina Corp.” MarketWatch, last accessed December 15, 2020.)

But things are beginning to improve as the global economy reopens.

Analysts estimate that Sanmina will see its revenues rebound 3.6% to $7.2 billion in fiscal 2021, followed by 8.7% to $7.8 billion in fiscal 2022. (Source: “Sanmina Corporation (SANM)” Yahoo! Finance, last accessed December 15, 2020.)

The thing about old-school technology companies like Sanmina is that they tend to be fundamentally sound.

Sanmina is no exception. It has consistently reported positive earnings before interest, taxes, depreciation, and amortization (EBITDA), including five-year highs in fiscal 2019 and 2020.

(Source: MarketWatch, op. cit.)

Sanmina Corp has also consistently delivered profits on both a generally accepted accounting principles (GAAP) and adjusted earnings-per-share (EPS) basis.

(Source: MarketWatch, op. cit.)

On an adjusted basis, Sanmina made $3.05 per diluted share in fiscal 2020. Estimates call for $3.29 per diluted share in fiscal 2021 and $3.55 per diluted share in fiscal 2022.  (Source: Yahoo! Finance, op. cit.)

Sanmina Corp has beat the consensus EPS and revenue estimates in eight of the last 10 quarters.

The company has also been producing positive free cash flow, but it needs to deliver consistent growth.

(Source: MarketWatch, op. cit.)

Analyst Take

Institutions and insiders have been buying up Sanmina stock. At last count, 341 institutions owned the majority of SANM stock. Moreover, insiders added a net 81,695 shares over the past six months. (Source: Yahoo! Finance, op. cit.)

Sanmina Corp’s valuation is attractive and should provide some downside support. The stock trades at 9.01 times its consensus fiscal 2022 EPS estimate, 0.26 times its fiscal 2022 sales estimate, and 1.33 times book value.

If you think about some of the staggering valuations currently assigned to many of the biggest technology stocks, Sanmina stock looks cheap.