Flex Ltd (FLEX, Financial) has seen a daily gain of 10.98%, however, it has experienced a 3-month loss of -8.65%. The company's Earnings Per Share (EPS) stands at 1.73. The question we seek to answer is: Is the stock Fairly Valued? In this analysis, we will delve into the financials and market positioning of Flex, providing a comprehensive understanding of its intrinsic value. We invite you to read on for a detailed evaluation of Flex's valuation.
Company Overview
Flex Ltd is a leading contract manufacturing company providing comprehensive electronics design, manufacturing, and product management services to global electronics and technology companies. Its operating segments include Flex Agility Solutions (FAS), Flex Reliability Solutions (FRS), and Nextracker. With its geographical segments spanning across China, Mexico, the United States, Brazil, Malaysia, Hungary, and others, Flex has established a strong global presence. As of October 26, 2023, Flex's stock price stands at $25.77, with a market cap of $11.50 billion, closely mirroring its fair value as per the GF Value of $23.54.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, Flex (FLEX, Financial) appears to be fairly valued. This implies that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it is crucial to examine a company's financial strength before deciding to buy its stock. Flex's cash-to-debt ratio stands at 0.65, which is lower than 66.79% of companies in the Hardware industry, indicating a fair financial strength of 6 out of 10 as per GuruFocus rankings.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. Flex has been profitable for 10 out of the past 10 years. With an operating margin of 4%, which ranks better than 50.06% of companies in the Hardware industry, Flex's profitability is strong at 9 out of 10 according to GuruFocus rankings.
Growth is a critical factor in the valuation of a company. Flex's 3-year average annual revenue growth rate is 11.6%, ranking better than 70.92% of companies in the Hardware industry. The 3-year average EBITDA growth rate is 20.6%, ranking better than 66.8% of companies in the Hardware industry, indicating strong growth .
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Flex's return on invested capital is 11.6, and its cost of capital is 8.89, implying the company is creating value for shareholders.
Conclusion
In conclusion, the stock of Flex (FLEX, Financial) appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 66.8% of companies in the Hardware industry. For a more detailed understanding of Flex's financials, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
