SANM Rises 26.4% in the Past 6 Months: Should You Buy the Stock?

Sanmina Corporation SANM has gained 26.4% in the past six months compared with the Electronic Manufacturing Services industry’s growth of 32.3%. It has outperformed the Zacks Computer & Technology sector and the S&P 500’s growth during this period.

Among its competitors, the company has outperformed Jabil, Inc. JBL but underperformed Celestica, Inc. CLS. Celestica has increased 38.9%, while JBL has gained 6.9%.

SANM Rides on Solid Momentum in Several End Markets

Sanmina is benefiting from solid traction in the Integrated Manufacturing Solutions (“IMS”) segment. The growth in IMS is primarily driven by growing investments in next-generation networking, cloud infrastructure and AI-driven hardware platforms by businesses worldwide. The acquisition of ZT Systems has significantly augmented Sanmina’s prospects in the rapidly growing hyperscale AI and data center infrastructure vertical.

In the fourth quarter, 2025, IMS revenues surged 72% year over year to $2.79 billion. Non-GAAP gross margin increased 8.7%, up 80 basis points year over year, driven by favourable mix and operational efficiencies.

The Components, Products and Services (“CPS”) business rose 4.33% year over year to $434 million in the fourth quarter. CPS non-GAAP gross margin was 12.9%, up 40 basis points year over year. Despite the modest growth, Sanmina’s CPS business provides an added layer of portfolio diversification and increases its exposure to several market including industrial, medical, defense and automotive. The ongoing investments in new programs are positioning CPS for long-term growth.

Operational Discipline, Robust Cash Flow & Liquidity Are Positives

During the fourth quarter, non-GAAP operating expenses decreased as a percentage of revenues. Consequently, non-GAAP operating profit was up 40 basis points year over year. Management’s strong focus on improving operational efficiency is a positive.

In the first quarter of fiscal 2026, Sanmina generated $178.7 million of net cash from operating activities compared with $63.9 million in the year-ago quarter. Free cash flow was $92 million. Strong cash flow performance enables the company to continue investing in new growth initiatives. 

The company is aiming to invest in capacity and technology improvement across its operations in the United States, India and Mexico. This strategy allows Sanmina to strengthen its market position against other major players in the electronics manufacturing services industry, such as Celestica, Jabil and Flex. Such strong growth in cash flow highlights strong working capital management. 

SANM’s current ratio (a measure of liquidity) stood at 1.70 at the end of the first-quarter fiscal 2026. A current ratio of more than 1 suggests the company is well-positioned to pay off its short-term debt obligations.

Estimate Revision Trend

Earnings estimates for Sanmina for 2025 have moved up 4.36% to $10.06 per share over the past 60 days, while the same for 2026 has increased 5.67% to $12.11. The upward estimate revision depicts bullish sentiments for the stock.

Key Valuation Metric of SANM

From a valuation standpoint, SANM appears to be relatively cheaper than the industry and lower than its mean. Going by the price/earnings ratio, the company’s shares currently trade at 13.52 forward earnings, lower than 24.12 for the industry and its mean of 17.32.

End Note

Sanmina is benefiting from strong momentum in multiple end markets. Solid growth in cash flow accentuates efficient capital management and implies that the company is well-positioned to invest in growth initiatives, as well as pay debt and dividends. Upward estimate revision underscores growing investors’ optimism about the stock’s growth potential. Hence, with a Zacks Rank #1 (Strong Buy) and attractive valuation, Sanmina is expected to gain from emerging market dynamics. 

You can see the complete list of today’s Zacks #1 Rank stocks here.
 

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This article originally published on Zacks Investment Research (zacks.com).

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